MBS INTERNATIONAL AIRPORT COMMISSION

 

March 17, 2011

 

MINUTES

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The meeting was held in the Airport Commission Board Room, 8600 Garfield Road, Freeland, Michigan 48623.Chairman George Biltz called the meeting to order at 1:30 p.m.Roll was called by Debbie Meisel.

 

COMMISSIONERS

 

Present††††††††††††††††††††††† Absent & Excused††††††††† Staff††††††††††††††††††††††††††† Other††††††††††††††††††††† †††††††††††

Tom Adams††††††††††††††† Bregitte Braddock†††††††††† Jeff Nagel†††††††††††††††††† Tim Sullivan, Sullivanís

George J. Biltz††††††††††† Greg Branch††††††††††††††††††† Andre R. Borrello†††††† Thomas L. Wood, Sullivanís†††††††††††††††

Kim Coonan (1:35)†††† Paula Whittington†††††††††† Ryan Riesinger†††††††††††

Darnell Earley††††††††††††††††††††††††††††††††††††††††††††††††††††† Debbie Meisel†††††††††††† Guests

Ernie Krygier†††††††††††††††††††††††††††††††††††††††††††††††††††††† ††††††††††††††††††††††††††††††††††† Mark Wilcer, RS&H

Tom Ryder††††††††††††††††††††††††††††††††††††††††††††††††††††††††† ††††††††††††††††††††††††††††††††††† Ryan Hall, RS&H

††††††††††††††††††††††††††††††††††† †††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††† Randy Morse, AHP

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PLEDGE OF ALLEGIANCE

 

MINUTES:Mr. Krygier made a motion to approve the minutes of the Regular Commission Meeting held on February 17, 2011.Mr. Adams seconded the motion.The motion was unanimously approved by the Board.

 

FEBRUARY 2011 WARRANTS AND CASH & INVESTMENT SUMMARIES:Mr. Ryder made a motion to approve the Warrant Registers for the February Payroll Account Check Numbers 85985-86039; the February Operations and Maintenance Check Numbers 41022-41079, void Check Number 40993; and the February Cash and Investment Summaries.Mr. Krygier seconded the motion and the Board unanimously approved it.

 

PUBLIC COMMENT:None

 

AUDIT PRESENTATION:Mr. Nagel thanked Ms. Meisel for all of her efforts with the audit and the overtime that was put in.She had no assistance since Carol Janks retired at the end of the year and worked with two new auditors from AHP.

 

The Finance Committee met on March 9, 2011 to discuss the audit reports with Randy Morse from AHP and airport staff.The committee recommended that the audit be presented to the Airport Commission at the March meeting.

 

Mr. Nagel introduced Randy Morse to review the 2010 Financial Statement.Mr. Morse also thanked Ms. Meisel for her assistance.The audit takes place after the books are closed and audit adjustments are made.This makes things easier and more efficient which enables AHP to meet a tight deadline.Mr. Morse stated that they have a very good working relationship with management but understands that they report to the Commission.They ask many questions and require supporting detail; they do not take managementís word.He was pleased to report that the audit went very well and there were no findings.They gave a clean opinion which is the best opinion you can have.

 

Mr. Morse stated that they did the annual audit, the PFC audit, and a single audit on the ARRA grant.There are specific requirements and compliance aspects that must be met.They also make sure that certain controls are in place over the expenditures.Mr. Morse was pleased to report that they had no findings.

 

Mr. Morse stated that there is $3.1 million shown in a pledged receivable as a result of the recent donations.Construction-in-progress under Capital Assets was $12.6 million last year but is $18.5 this year because of the terminal project.Accounts payable was $68,000 last year and is $1.2 million this year; also a result of construction and timing of invoices.The total restricted assets are higher primarily because of the restricted pledges.

 

Mr. Morse stated that passenger traffic was down 2% for the year.The count had been lower; however the last quarter was a good quarter and brought the percentage up.Landing fees were up approximately $35,000 because of the Northwest pilots being trained on Delta aircraft during the months of January and February. Concession fees were also up.Expenses were up causing an operating loss.Interest income used to be substantial revenue but with interest rates low it has dropped tremendously.Net assets are approximately $8 million up from last year.

 

Mr. Morse stated that the airport is qualified as a no-risk auditee which means there have been no audit findings in the last two years. He pointed out to the Commissioners that they should remain involved in the budget and asking questions.Internal controls and segregations of duties cannot always be accomplished with the limited accounting staff. ††Also, in regards to the ARRA grants, there were some minor reporting items with reconciliations but nothing of significance or requiring any reporting.The results of the audit, Federal expenditures and PFCs were good.

 

Mr. Krygier asked if there is a way to measure the return on public relations expenditures since the number increased from last year.Mr. Nagel stated that it is a challenge.Bolger & Battle has given some information on things that the airport has done with the Midland Daily News, the Saginaw Spirit and the Loons.Most of the increase in that account is from the air service assistance contract with MRS.Mr. Nagel stated that some of things he has seen from Patrick McIntyre and Tom Rockne are encouraging signs.

 

Chairman Biltz stated that he had several questions but first thanked Ms. Meisel for all the time taken to get ready for the audit and to be able to receive a clean audit from the auditors.He confirmed that salaries, wages, and benefits had increased by 8% and that the majority of the increase was in the benefits.Mr. Morse agreed and stated that it was primarily health care and pension costs.Chairman Biltz stated that the question for the Personnel Committee is how to address this continual increase.This is a serious issue to be discussed since union negations are in progress and the Marketing Committee also needs to determine how to increase passenger traffic. The airport is running at a loss and it isnít sustainable over time.

 

Mr. Coonan stated that he likes to be progressive and would like to see if the Commission can support or send a message to Washington who can make a decision in regards to health care reform. In Bay County they sent a resolution mandating reform and driving down health care costs.If it continues as it is no one will have health insurance.Chairman Biltz stated that his concern is how to keep the airport solvent.He also said that he will defer to those on the Commission that work in politics and in the communities to guide in the right direction.Mr. Earley stated that the Personnel Committee is already aware of the situation and what is sustainable for the union negotiations.Mr. Nagel stated that during the last union negotiation the Commission and the union approved some health care reform measures, but the airport did not realize the savings it thought it would get.Mr. Nagel agreed with Chairman Biltz that all options have to be looked at.Mr. Coonan asked if the airport is a public entity because there may relief from the legislature which is going to mandate that all the employees pay a minimum of 20% of health care costs.Mr. Earley made a motion to receive the 2010 financial audit.Mr. Krygier seconded and the motion passed unanimously.

 

MRS AGREEMENT:Mr. Nagel stated that MBS contracted with Management Reporting Services LLC in April 2010 to assist with tracking airfares, establishing and maintaining communication with the carriers and assisting in the recruitment of additional air service.The term of the contract was for one year which would put the expiration date at March 31, 2011.Mr. Nagel met with Patrick McIntyre and Tom Rockne about a possible contract extension.Before a recommendation is made on a long-term extension, Mr. Nagel would like the Marketing Committee to meet with Patrick and Tom as well.Therefore, until such time when a Marketing Committee meeting can be scheduled, it is recommended that a three-month extension of the existing contract be approved.This keeps current services in place without interruption.This was discussed with Patrick and Tom and they agreed with this plan.Mr. Nagel stated that the cost for this was included in the 2011 budget.Mr. Coonan made a motion to approve a three month extension of the existing MRS/MBS agreement and authorize the Chairman, or in his absence the Vice Chairman, to sign the related documents.Mr. Adams seconded and the motion passed unanimously.

 

RENTAL CAR AGREEMENTS:Mr. Nagel stated that the rental car agreements expire at the end of April, 2011.With the new terminal coming online in the next couple years, there is no reason to bid the rental car concessions at this time.However, it is appropriate to adjust the rents paid on the office and counter space.Discussions with each of the operations have resulted in agreement of a 3% increase in rent for 2011 and a 3% increase in 2012.All other terms and conditions in the existing leases will remain as-is.

 

The Finance Committee met on March 9th and discussed this item.The committee agreed with the proposed rate increase and recommended that this be brought to the Commission for their consideration.Mr. Krygier made a motion to approve an amendment to the rental car leases with a 3% increase in rent for 2011 and a 3% increase in rent for 2012 and authorize the Chairman, or in his absence the Vice Chairman, to sign the related documents.Mr. Adams seconded.After discussion, the motion passed unanimously.

 

Mr. Nagel mentioned that Enterprise may co-locate their operation with National/Alamo and if they did, MBS would not receive rent from Enterprise but would still receive concession fees.

 

SSP LEASE UPDATE:In January, 2011, the Airport Commission approved a lease extension with SSP which called for MBS to pay SSP a monthly Management Fee to run the food and beverage operation at MBS Airport.

 

Since that time, SSP has been in discussions with Sullivan Marketing to arrange for continued food and beverage service at the airport.Sullivanís is a local company with a restaurant in Frankenmuth along with catering sites throughout the area.In addition, Sullivanís provided the food and beverage service at Flint Bishop Airport for 15 years.

 

In summary, the goal is to continue the excellent food and beverage service at the airport, while keeping within the financial expenditures approved by the Commission in January 2011.

 

Mr. Nagel stated that he has been working on this item with Mr. Borrello, SSP and Sullivanís.Two draft documents have been received and reviewed that are proposed to be approved by SSP and Sullivan Marketing in relation to SSPís appointment of Sullivanís as interim manager of the airport concession operations. 

 

SSP and Sullivanís plan is to execute an Interim Management Agreement whereby Sullivanís will be appointed SSPís agent and on behalf of SSP will manage the airport concession services as of May 1, 2011.

 

The Sullivanís management team, consisting of Tim Sullivan and Tom Wood, understand that MBS will be opening the new terminal and will go through a Request For Proposal process to select the food and beverage provider for the new facility.Sullivanís also understands that its stay at MBS could be short term, but nevertheless, plans to move forward with the transaction, which includes the purchase of SSPís related assets.The purchase includes the equipment, the current inventory, the transfer of the liquor license and the book of business for the Skyroom.  Because current inventory is included in the sale and because this inventory changes weekly, the purchase price has not yet been determined.  Estimates are around $40,000 for this transaction.

 

All parties are working toward a May 1, 2011 transfer date for appointing Sullivanís as manager.  The first formal step is for the Airport Commission to grant consent for the sale/purchase of assets between SSP and Sullivan Marketing and grant consent of a Management Agreement between SSP and Sullivan Marketing (the Management Agreement is needed on an interim basis until the liquor license is fully transferred).  Once this consent is granted, Sullivanís can begin to take more formal steps such as having discussions with current employees, meeting with potential banquet clients and taking deposits for events.

 

Because Sullivanís is willing to take a short term approach to this purchase and because the purchase price will be approximately $40,000, MBS can financially assist with this transaction by contributing $10,000 toward the sale.  In return, MBS will actually become the liquor licensee and Sullivanís will be co-licensee.  This will help MBS in the future by avoiding lengthy liquor license transfer delays, as in this transaction.  In addition, MBS plans to pay Sullivanís $1,000 per month as a Management Fee to operate the business.  The total financial contribution from MBS will not exceed the amount that was previously agreed to for SSP to remain.  The Finance Committee met on March 9, 2011 and discussed this arrangement.  The committee agreed with the recommendation and asked that this be brought to the full commission for approval.

 

Mr. Coonan made a motion to grant consent for the sale/purchase of the SSP inventory, etc. at MBS to Sullivan Marketing, grant consent of a Management Agreement between SSP and Sullivan Marketing and authorize the Chairman, or in his absence the Vice Chairman, to sign all related documents.  Both of these approvals are subject to approval by the Michigan Liquor Control Commission, as necessary.  Mr. Krygier seconded and the motion passed unanimously.

 

Mr. Early made a motion to approve an expenditure of $10,000 to Sullivanís to assist with the transfer of the management and sale/purchase from SSP to Sullivan Marketing and for MBS to be designated as the Licensee for the State liquor license subject to approval by the Michigan Liquor Control Commission, as necessary.  The motion also includes approval for MBS to pay Sullivanís a $1,000 per month Management Fee to operate the food/beverage service at MBS, effective on the date the transfer is completed, and to expire on December 31, 2012.Mr. Krygier seconded the motion.

 

Mr. Nagel stated that the total package is very similar to the proposal that was passed in January for SSP.At that time it was felt that the financial contribution was in everyoneís best interest to keep the food and beverage service.It was important to find a food and beverage provider for the passengers but this company has vending experience and immense catering experience in Frankenmuth, Flushing and in this area.They plan on keeping all the business that is currently booked in the Skyroom for this year and actively book for next year.Mr. Nagel reiterated that Sullivanís was also at Flint Bishop for 15 years.He stated that with them being local that there will be much more hands on than in the past with the corporate companies.

 

Mr. Earley agreed but stated that in the agreement there should be financial reporting required on a regular basis.Chairman Biltz stated that what was agreed to with SSP was done because their management style led to a loss position for them and hopefully Sullivanís will be a more aggressive and successful management style that will lead to not having to furnish support.

 

Chairman Biltz had questioned whether anything had to be done with the previous motion in January.Mr. Nagel stated there may be one more formal action needed at the April meeting or possibly a special meeting.The agreement that is being prepared now would have SSP continue until May 1, 2011 and then there may be a stop-gap agreement.Mr. Borrello received and will review documents that were worked out between SSP and Sullivanís.The two companies needed an approval from the board so that they could proceed.Chairman Biltz wanted to be sure that the airport does not have a dual obligation.Mr. Nagel stated that it is his intent that the financial obligation to SSP will end on May 1st and Sullivanís will begin on May 1st.Mr. Borrello stated that the documents he saw agreed with those dates.

 

Mr. Krygier verified the MBS will be the holder of the liquor license.Mr. Nagel stated that is the intent.MBS would be the licensee and Sullivanís would be co-licensee.There being no further discussion, the motion passed unanimously.

 

PHASE V CHANGE ORDER #003 (SPENCE BROTHERS CONTRACT):Chairman Biltz stated that this change order was added to the agenda.As construction proceeds, more and more change orders are anticipated.The Operations Committee will discuss how to handle these last minute change orders and will come back to the board with a recommendation.

Mr. Nagel stated that the proposed Change Order (#003) to the Spence Brothers contract was received yesterday.While this change order adds three items for $12,689.16 it also has a deduction of $80,575.00 making a net difference in the contract a negative $67,885.84.Mr. Nagel reviewed the various items with the board.Mr. Krygier made a motion to approve Spence Brothers Change Order #003 and authorize the Chairman, or in his absence the Vice Chairman, to sign the related documents.Mr. Adams seconded the motion.Discussion took place regarding the change to PVC pipe and whether Mr. Wilcer was confident that it would not be a maintenance issue.Mr. Wilcer stated that RS&H are very comfortable with it and staff also supported it.From a maintenance standpoint, PVC does not collect as much on the inside of the pipe and is easier to router if needed. Mr. Wilcer stated that they did a very thorough investigation and they have no reservations.There being no further discussion, the motion passed unanimously.

 

OLD BUSINESS: Mr. Nagel stated that the House Ways and Means Committee in Washington, D.C. which is chaired by Mr. Camp from Midland, put out a bill to reauthorize the Airport Airway Trust Fund for a couple of years.He is hoping in the next couple of months to see a multi-year bill passed.

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NEW BUSINESS:Mr. Nagel stated that Carol Janks retired in December from the airport after 22 years of service.He sadly reported that about two weeks ago, she passed away.Flowers were sent on behalf of the Commission.†††

 

ADMINISTRATIVE MATTERS:Next regular meeting is scheduled for April 21, 2011.

 

ADJOURNMENT:There being no further business, Mr. Krygier made a motion to adjourn.Mr. Earley seconded and the Board unanimously passed the motion.The meeting adjourned at 2:20 p.m.

 

 

††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††† ††††††††††††††††††††††† ††††††††††††††††††††††††††††††††††††††††††††††††††††††††††† Ernie Krygier, Secretary