HOUSE OF REPRESENTATIVES |
H.B. NO. |
1953 |
THIRTY-FIRST LEGISLATURE, 2022 |
H.D. 2 |
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STATE OF HAWAII |
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A BILL FOR AN ACT
RELATING TO CONCESSIONS.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. The legislature finds that like airports on the continental United States, the department of transportation needs flexibility and discretion to grant relief to airport concessions in times of hardship, such as the coronavirus disease 2019 (COVID-19) pandemic. The current lack of flexibility resulted in the department of transportation not being able to grant the same relief to all airport concessions who suffered through the COVID-19 pandemic. This resulted in unfair treatment as some concessions received an extension on their contracts, while others did not receive any form of relief.
The legislature further finds that unlike Hawaii, some airports in the continental United States are granted the flexibility needed to offset any hardship faced by concessions, such as offering an extension of a contract or authorizing a modification to an existing contract to allow extra time to recoup its losses due to an unexpected crisis. Other airports have recognized that in times of crises, if a concession closes it will take a long period of time to find a replacement to service passengers. For Hawaii, it typically takes eighteen to twenty-four months, or longer, to find and replace a concession. In addition, temporary operators with temporary facilities often generate more complaints and problems.
The legislature also finds that the State's antiquated laws and contract provisions must be modified to address any unfair treatment of concessions and to allow the department of transportation the ability to better support airport concessions.
The legislature recognizes airport concession revenues are very important. Historically, airport concessions have averaged about fifty per cent of airport operation revenues, and has, at least on one occasion, reached as high as seventy per cent.
The legislature further recognizes that concessions are unique and very challenging businesses as they have term limits, are dependent on travelers, and cannot appeal to the general public like other local businesses. Airport concessions have suffered devastating losses, and the levels of pre-COVID-19 passengers are not expected to return until the beginning of 2026, according to the State's chief economist.
The legislature additionally finds that the unpredictable and devastating hardships of COVID-19 and its variants are a wakeup call and require the development of new business models between airports and concessions. While the department of transportation expeditiously utilized direct federal relief funds to support airport concessions, the legislature is concerned that the department has not yet moved forward in the development of new concession-business models. In June 2021, this position was strongly advocated for all continental United States airports by national organizations such as American Association for Airport Executives, Airports Council International – North America, and the Airport Restaurant and Retail Association.
The intent of this Act is to give the department of transportation flexibility and discretion to grant relief like other continental United States airports in times of crisis. While this Act does not mandate that the department of transportation provide any relief, it gives the department the option to consider all types of relief opportunities.
Accordingly, the purpose of this Act is to provide the department of transportation flexibility and discretion to provide fair and important relief to concessions who are struggling in times of unpredictable crisis to remain in place and provide services to passengers.
SECTION 2. Section 102-10, Hawaii Revised Statutes, is amended to read as follows:
"§102-10 Modification of contract
terms. [If] (a) Notwithstanding any other law to the contrary,
if during the term of the contract [(], including [contracts
which have] any type of contract that has been executed [and are]
or is presently in force[) there]:
(1) There has
been a reduction of fifteen per cent or more in the volume of business of the
concessionaire for a period of sixty days or more, computed on the average
monthly gross income for the eighteen months [just prior to] immediately
preceding the period or [as long as] the length of time that
the concessionaire has been in the business, whichever period is shorter, and [such]
the reduction, as determined by the officer letting the contract,
is caused by construction work conducted during the period of time on, or
within or contiguous to, the public property upon which the concession is
located by either the state or county governments, or both, the officer, with the
approval of the governor in the case of a state officer and the chief executive
of the respective county in the case of a county officer, may modify any of the
terms of the contract, including the agreed upon rent, for a period which will
allow the concessionaire to recoup the amount lost by [such] the
reduction; [provided that if] and
(2) A significant
hardship has occurred to one or more airport concession, as determined by the
officer letting the contract, the officer, with the approval of the governor, shall
have the discretion to grant, in any form as may be applicable, recoupment for
the amount lost as may be applicable for the period that the concessionaire has
been in business; provided that the form of recoupment may periodically include
one or more of the following:
(A) Entering
into a new contract;
(B) Modifying
the terms of any type of existing contract, including without limitation holdover
agreements or revocable permits; the adjustment of rent; granting of an extension
of the contract's term with or without any further required investments or obligations;
permitting the assumption or transfer, or both, of a contract; permitting the
withdrawal of the contract without a concessionaire being in default or barred
from doing business with the State, or both; and any other form of relief to a concession
suffering significant hardship; and
(C) A
requirement for the airport concession to recall employees who were laid off due
to an act of God.
(b) Subsection (a) shall not apply:
(1) If the
contract includes provisions allowing modification for all of the [above]
contingencies[, this section shall not be applicable thereto; provided
further that this provision shall not apply to] and types of relief described
in this section; and
(2) To any
particular concession if the application [thereto] may impair any
contractual obligations with bondholders of the State or counties or with any
other parties.
(c) For airport concessions, the term of any contract
shall not be more than
years, which shall include the remaining term of the contract and any extension
thereof.
(d) To the extent that the provisions of chapter 171
conflict with the purpose and intent of this section, chapter 171 shall not apply
to airport concessions.
(e) For purposes of this section, "significant
hardship" includes one or more of the following that may occur or continue,
or both, from time to time:
(1) A reduction of:
(A) Fifteen
per cent or more in the volume of business of the concessionaire for a period
of sixty days or more, computed on the average monthly gross income for the
eighteen months immediately preceding the period or the length of time that the
concessionaire has been in business, whichever is shorter; and
(B) Ten
per cent or more in the volume of business of the concessionaire for a period
of one hundred eighty days or more, computed on the average monthly gross
income for the period one hundred eighty days immediately preceding the period
or the length of time that the concessionaire has been in business, whichever is
shorter;
(2) A delay of more
than ninety days in the anticipated substantial completion of premises being
constructed by the State resulting in less time for the concessionaire to
construct, occupy, and amortize the concessionaire's tenant improvements over the
remaining term of the concessionaire's contract with the State;
(3) Unexpected
circumstances, including but not limited to rising international tariffs,
construction site or design problems, or other circumstances resulting in the
infeasibility or other significant burden for the concessionaire to proceed
with the improvements described in the concessionaire's contract with the
State;
(4) Situations in which
one or more concession contracts have more favorable relief terms to address
financial or operating hardships when compared to the relief terms of other concession
contracts;
(5) Situations in which
one or more of a concessionaire's locations are in default, withdrawn, or in
the process of being transferred and a sublessee, a joint venture partner, or
licensee generating less than twenty-five per cent or less of the total gross
receipts of the concessionaire will not be allowed to continue operations and
amortize the cost of the sublessee, joint venture partner, or licensee's
concession improvements over the remaining term of the sublessee, joint venture
partner, or licensee's contract with the concessionaire; or
(6) Situations in which an extension of time on the contract would assist the concessionaire in the recoupment of the concessionaire's loss or the loss of time for the concessionaire to amortize the cost of the concession improvements, or both, due to the loss of volume of business as described paragraphs (1)(A) and (1)(B)."
SECTION 3. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 4. This Act shall take effect on July 1, 2050.
Report Title:
DOT; Airport Concessions; Substantial Hardship; Contracts
Description:
Provides the department of transportation with more flexibility and discretion to address substantial hardship situations that impact airport concession contracts. Effective 7/1/2050. (HD2)
The summary description
of legislation appearing on this page is for informational purposes only and is
not legislation or evidence of legislative intent.