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Transmittal - 8/23/2021Lisa Shaffer (Jul 19, 2021 16:38 MDT)07/19/202107/19/2021 ERIN MENDENHALL Mayor OFFICE OF THE MAYOR P.O. BOX 145474 451 SOUTH STATE STREET, ROOM 306 SALT LAKE CITY, UT 84114-5474 WWW.SLCMAYOR.COM TEL 801-535-7704 beverages, entertainment, and free Wi-Fi to active duty, Reserve, and Guard service members and their families at no charge for 365 days per year. Currently, there are over 32,000 active Guard and Reserve service members residing in Utah. Due to space constraints and a previous lack of local interest, the Airport has historically not had a USO lounge. However, with the redevelopment of the Airport, limited space is now available for such a use. The space identified for the proposed USO lounge (the “Lounge”) is located post-security on the mezzanine (Level 3) of the Airport Terminal. It is currently vacant and used for the occasional meeting by Airport staff and tenants. It is approximately 933 square feet, which is not sufficient nor in the appropriate level of the Airport to be used for a non-aeronautical (i.e. commercial) use. If authorized by City Council, the Airport will enter into a facility lease with the USO (the “Facility Lease”). The lease will have an initial five-year term with two, five-year renewal periods that may be exercised at the Airport’s discretion. The USO will take occupancy of the space in as-is condition and will be required to obtain the funding necessary for all necessary physical space improvements, signage, and associated permits and approvals. When ready for operation and occupancy, USO will lead and direct the Lounge with one staffed employee, and volunteers from the local community much like the Airport does with its volunteer program. The Airport will retain the right to terminate the Facility Lease or relocate the Lounge with appropriate notice for the ongoing and orderly development of the Airport. Because the USO is a volunteer organization and staffs its lounges with volunteers, the USO would not be able to provide benefits to service members and their families without the City’s waiver of lease fees. Entering into the Facility Lease for the Lounge with USO at the Airport will benefit the residents of Salt Lake City and surrounding communities by demonstrating Salt Lake City’s support of all military service members and their families around the country who will fly through Salt Lake City for many years to come. It will further enhance the amenities available to travelers of the new Airport and will provide a venue that is customary in facilities such as the Airport. Though space at the new Airport is still very limited, the limited space available best accommodates a use such as the Lounge at the Airport, which permits the City to respond to interest from the local community and meet a long-term goal for the City. MEMORANDUM TO: City Council Members FROM: Erin Mendenhall, Mayor Bill Wyatt, Executive Director, Department of Airports Shane Andreasen, Director of Administration & Commercial Services Megan DePaulis, Senior City Attorney DATE: July 7 , 2021 SUBJECT: Informal Analysis of Public Benefits Provided by United Service Organizations, Inc., in Exchange for a Below-Market Facility Lease of Mezzanine Level Office Space Located at the Salt Lake City International Airport _____________________________________________________________________________ INTRODUCTION The Administration recommends that City Council authorize it to enter into a facility lease agreement (“Facility Lease”) for 933 square feet of SLCDA owned mezzanine level office space CAUP-3-001 (“City Property”) at the Salt Lake City International Airport (“Airport”) with United Service Organizations, Inc., a Virginia not for profit entity (“USO”) for a fee of $1 a year, to facilitate the development and operation of a USO Airport Lounge (“Lounge”) for the benefit of active duty, Reserve, and Guard service members and their families. The term of the Facility Lease will be five years, with two, five-year extensions that may be exercised in the City’s discretion. Though a formal study of the benefits to be received by the City in exchange for the benefit provided to USO is not required under Utah Code ⸹10-8-2, this informal analysis has been prepared to help assist City Council’s evaluation of the recommended action. LEGAL FRAMEWORK Under Utah law, after first holding a public hearing a municipality may “authorize municipal services or other nonmonetary assistance to be provided to a nonprofit entity, whether or not the municipality receives consideration in return.” Utah Code §10-8-2(1)(a)(v). Because the USO is a nonprofit entity, the City may waive the fair-market rental rates it would ordinarily be required to receive for use of the City Property, so long as the municipal legislative body first holds a public hearing regarding the waiver and authorizes the Administration to enter into the Facility Lease for the below-market lease rates. Utah Code §10-8-2(3) outlines the purposes for which a municipal body may appropriate funds as “for any purpose that, in the judgment of the municipal legislative body, provides for the safety, health, prosperity, moral well-being, peace, order, comfort, or convenience of the inhabitants of the municipality.” There are statutory factors that must be considered in determining the propriety of such an appropriation or waiver if made to any type of entity or individual other than a nonprofit entity as set forth under Utah Code §10-8-2(3)(e). However, it 2 is helpful to consider the same factors when providing a waiver to nonprofit entities as well. The factors are: (1) The specific benefits (including intangible benefits) to be received by the City in return for the arrangement; (2) The City’s purpose in making the appropriation, including an analysis of how the safety, health, prosperity, moral well-being, peace, order, comfort or convenience of the residents of Salt Lake City will be enhanced; and (3) Whether the appropriation is “necessary and appropriate” to accomplish the reasonable goals and objectives of the City in the area of economic development, job creation, affordable housing, blight elimination, resource center development, job preservation, the preservation of historic structures and property, and any other public purpose. The application of these factors to the waiver of lease fees under the proposed Facility Lease is discussed below. BACKGROUND USO Airport Lounges exist in over 100 airports around the world, including at most international airports across the United States. However, due to space constraints and a previous lack of local interest, the Airport has historically not had a USO. Some airport locations are pre- security while others are after security depending on space availability and the nature of the airport. With the Airport’s significant connecting passenger traffic, a post-security location for the Lounge would be more desirable and is therefore being proposed for the Airport. Locations in airports are built-out and improved by donations and volunteers, operationally funded by local and national donations, and have a volunteer workforce. They provide active duty, Reserve, and Guard service members and their families an area for comfort no matter where their journeys are taking them, or why. Although staffed by volunteers from a day-to-day perspective, the USO will have at least one full time paid manager responsible for the overall operation. Typical USO Lounges feature comfortable furniture, donated snacks, beverages, entertainment, and free Wi-Fi to active duty, Reserve, and Guard service members and their families at no charge for 365 days per year. With the opening of the new Airport, the Airport started to receive feedback about the lack of a USO airport lounge. With that community interest, the USO also received community feedback about the desire to develop and operating an airport lounge at the Airport. With the redevelopment of the Airport, limited space is now available for such a use. The space identified for the Lounge is located post-security on the mezzanine (Level 3) of the Airport Terminal. It is currently vacant and used for the occasional meeting by Airport staff and tenants. It is approximately 933 square feet, which is not sufficient nor in the appropriate level of the Airport to be used for a non-aeronautical (i.e., commercial) use. 3 TERMS OF THE LEASE AND PUBLIC BENEFITS PROVIDED Upon City Council approval, the Airport will enter into the Facility Lease with USO. The Facility Lease will have an initial five-year term with two, five-year renewal periods that may be exercised at the Airport’s discretion. USO will take occupancy of the space in as-is condition and will be required to obtain the funding necessary for all necessary physical space improvements, signage, and associated permits and approvals. When ready for operation and occupancy, USO will lead and direct the Lounge with one staffed employee, and volunteers from the local community much like the Airport does with its volunteer program. The Airport will retain the right to terminate the Facility Lease or relocate the Lounge with appropriate notice for the ongoing and orderly development of the Airport. In addition to below-market rent the Airport will provide utilities, which are not separately metered. All other costs associated with the development and operation will be paid by USO. This includes, among other things, janitorial expenses, employee badging, central receiving and distribution center fees invoiced by the Airport, storage space fees, if necessary, and all other costs. Any taxes related to the Facility Lease also will be the responsibility of USO. Because the USO is led by paid staff with a volunteer workforce that doesn’t receive revenues from any of the services it provides, the USO would not be able to operate at the Airport without below-market rents. Having the Lounge will benefit the residents of Salt Lake City, the state of Utah, and the surrounding communities in southwest Wyoming, southeast Idaho, eastern Nevada, and northwestern Colorado by providing a dedicated lounge area where active duty, Reserve, and Guard service members and their families will be able to meet and relax together as they transit through the Airport. Currently, there are over 32,000 active Guard and Reserve service members residing in Utah. Those individuals do not currently have a location in the Airport where they can find rest and respite before a deployment, on their journey home from one, or wherever else their travels may have taken them. Therefore, having the Lounge at the Airport will enhance the health, moral well-being, peace, and comfort of these residents of Salt Lake City and the state of Utah. Since airports are where these individuals spend quite a bit of time as they serve their missions, having a USO will add one more passenger amenity that is currently lacking at the Airport and one that is typically provided at an airport of Salt Lake City’s size and importance. It will also provide a new and unique connection to the region and its residents, and former military members as they volunteer with the daily operation of the USO. The Lounge will provide for additional professional-level job creation, in addition to numerous volunteer opportunities. CONCLUSION Entering into the Facility Lease with USO at the Airport will benefit the residents of the City, the state, and surrounding communities by demonstrating the Salt Lake City’s support of all military service members and their families around the country who will fly through Salt Lake City for many years to come. It will further enhance the amenities available to travelers of the new Airport and will provide a venue that is customary in facilities such as the Airport. Having both the space available to accommodate a Lounge at the Airport, and the interest from the local community has been a long-term goal for the City. It further establishes Salt Lake City as the 4 gateway to the world, especially for members of the military who may transit the Airport for some of their most life-changing moments. RESOLUTION NO. __ OF 2021 A Resolution Authorizing the Waiver of Lease Fees to Facilitate the Operation of an Airport Military Service Members Lounge Operated by United Service Organizations, Inc., a Nonprofit Corporation, at the Salt Lake City International Airport WHEREAS, United Service Organizations, Inc., a nonprofit corporation (“USO”) advances the City’s goals of safety, health, moral well-being, peace, comfort and convenience for the residents of Salt Lake City by providing a comfortable lounge area in airports for military service members and their families; and WHEREAS, the primary beneficiaries of the construction of the USO airport lounge (“USO Lounge”) will be active military service members from Salt Lake City, Utah generally, and the surrounding region; and WHEREAS, the USO will operate the USO Lounge with volunteer efforts and a paid staff member; and WHEREAS, the below-market lease fee waiver to the USO will facilitate the development of the USO Lounge, which would otherwise be financially unfeasible; and WHEREAS, the City is willing to provide assistance to the USO in the form of lease fee waiver for a five to fifteen-year facility lease at the Salt Lake City International Airport (the “Lease Fee Waiver”); and WHEREAS, Utah Code Section 10-8-2(1)(a)(v) allows public entities to provide nonmonetary assistance and waive fees to and for nonprofit entities after a public hearing; and WHEREAS, though Utah Code Section 10-8-2 does not require a study for such waiver or assistance, in this case the Administration voluntarily performed an analysis of the nonmonetary assistance to the nonprofit corporation (the “Analysis”); and WHEREAS, the City Council conducted a public hearing relating to the foregoing, in 2 satisfaction of the requirements of Utah Code Section 10-8-2; and WHEREAS, the Council has reviewed the Analysis, and has fully considered the conclusions set forth therein, and all comments made during the public hearing; THEREFORE, BE IT RESOLVED by the City Council of Salt Lake City, Utah, as follows: 1. The City Council hereby adopts the conclusions set forth in the Analysis, and finds and determines that, for all the reasons set forth in the Analysis, the Lease Fee Waiver is appropriate under these circumstances. Adopted by the City Council of Salt Lake City, Utah, this _____ day of _________, 2021. SALT LAKE CITY COUNCIL ______________________ Chairperson Attest: ___________________________ City Recorder Salt Lake City Attorney’s Office Approved as to Form: ___________________________ Senior City Attorney