Below The Radar: Internal Airport Documents Show Extent Of Airport Actions, Taken Since Late 2012 Without Council Voted Approval, To Facilitate Int'l Flights
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(Mar. 1, 2015, 9:50 p.m.) -- A Feb. 23, 2015 memo by LB Airport's new Director Bryant Francis says the City has received a request to "begin work" to seek a U.S. Customs facility that would enable international flights by JetBlue.
However internal Airport documents show that Airport management has been engaged since at least late 2012 in efforts to facilitate a federal Customs facility to enable international flights for JetBlue (and potentially others.)
The company's formal request (dated Feb. 23, 2015) doesn't use the phrase "begin work"...and the Airport Director's use of that term is contradicted by internal Airport documents obtained by LBREPORT.com that show exactly the opposite.
[Scroll down for further.]
The Airport documents, obtained by LBREPORT.com under the CA Public Records Act, show that since at least late Nov. 2012, LB Airport managenent -- without voted City Council policy approval -- worked steadily to facilitate bringing a federal Customs faciltiy and international flights to the Airport to suit JetBlue. The documents show that in pursuit of the project, Airport managemt and staff:
Held multiple meetings, conference calls, email discussions
Joined JetBlue officials in a Long Beach meeting with a high ranking federal Homeland Security and Border Protection (U.S. Customs) official to discuss a federal Customs facility
Hired a firm to produce a budgetary opinion of the probable cost of a Customs facility
Hired a firm to produce a "financial impact report"
Invited a retired CSULB professor emeritus of economics to produce an "economic impact report." (The professor subsequently told the Airport the report wasn't expected to show large local economic impacts from visitors as a result of international flights)
Received conceptual drawings of the facility's design from JetBlue
Received a "term sheet" written by JetBlue that the Airport Director said "looked good" (but to our knowledge didn't sign) that spelled out proposed respective actions by the parties regarding international flights.
Multiple documents (including those stemming from JetBlue) recite continued support for LB's Airport ordinance. However, no documents from any party indicated any serious analysis or discussion of potential risks to LB's Airport ordinance from allowing a Customs facility that would enable international flights by JetBlue and other international operators. The Airport Ordinance is the only legal protection the City has from uncontrolled, unlimited flights at any hour of the day or night on any runway.
As noted by others [including LBREPORT.com] and corroborated in Feb. 19, 2015 Airport Advisory Commission testimony by City Prosecutor/former Airport Advisory Commissioner Doug Haubert, allowing a federal customs facility wouldn't directly change the Airport ordinance...but could lead to unintended consequences that could ultimately cost Long Beach its protective Airport ordinance.
Mr. Haubert (who testified alongside Assistant City Attorney Mike Mais at a Feb. 17, 2015 Council study session on LB's Airport ordinance) stated during Feb. 19 Q & A to the City's Airport Advisory Commission that if the City were to allow a federal Customs facility, the action could trigger a challenge to LB's Airport ordinance from international operators -- cargo and/or passenger carriers -- that might seek flight slots currently filled and thus unavailable under the Airport ordinance. In that way, Council approval of international flights -- without touching the Airport ordinance itself -- could create an entirely new category of risk exposure from international operators that LB doesn't have now, to our knowledge isn't required to allow and hasn't previously faced.
To view Mr. Haubert's Feb. 19 testimony in detail (which remains unreported by any other LB outlet as of March 1 at 9:45 p.m.), see LBREPORT.com coverage here.
Mr. Haubert noted that if a challenger were to prevail, the City would effectively become powerless to prevent unlimited flights at all hours of the day and night on all Airport runways. Having a locally uncontrollable international airport would have citywide impacts (including added pollution, freeway and street congestion) and would be strongly felt in parts of LB's 3rd, 4th, 5th, 7th and 8th Council districts. Property tax revenue is currently LB's largest General Fund revenue source.
Airport management didn't tell the public what it was doing, but it did tell city management and LB's City Council and Mayor via memos in August 2013 and November 2013 (see timeline below.) To our knowledge, no LB elected officials disclosed the developments publicly, or raised isues, or voiced objections during the run-up to 2014 citywide elections.
City officials have since tried to downplay what's taken place, but the record below speaks for itself. The internal Airport documents indicate the following:
Nov. 30, 2012 LB Airport Director Mario Rodriguez and another LGB staffer scheduled a conference call with JetBlue regarding Int'l FIS [Federal Inspection Services (Customs)]. The Airport provided no substantive documents providing details of what took place.
Feb. 6, 2013: Airport Director Rodriguez emails several recipients (including a JetBlue rep) that he is setting up a meeting [a telecom] with reps from Houston's Hobby Airport to "capitalize on the process they're currently going through" to set up a Federal Inspection Facility. In an email exchange that includes JetBlue reps, Airport Director Rodriguez says, "I am not worried about the bricks and mortar (that's easy.) Where we have to all pull together is the DC regulatory/political positioning. This will determine the capital and operational costs of this facility." A JetBlue company rep says they'd be happy to join and "just discussed the issue with CBP [Customs Border Protection] leadership in DC last week."
June 27, 2013: JetBlue Sr. VP Rob Land asks if Airport Director Mario Rodriguez might be available for a brief meeting on July 11 at the Airport with JetBlue CEO Dave Barger who'll be in town. The purpose "would be solely to discuss the conceptual plans for bringing CBP [Customs Border Protection] to Long Beach Municipal Airport."
June 29, 2013: Airport Director Rodriguez emails Airport staff to set up a meeting with City Manager West and Assistant City Maanger Frick to discuss JetBlue's request for an FIS. "Since this is a policy decision we may need to develop a Council Item requesting direction...[P]lease get started on a document requesting direction that will either become a TFF ["to-for-from" memo"] or a Council item. Make sure to indicate that (1) It is a request by JB (2) No detrimental effect on the ordinance..."
July 3, 2013: Airport Director Rodriguez instructs Airport staff to prepare a Council item or a "to-for-from" memo that addresses items related to LGB's finances.
July 11, 2013: Airport Director Rodriguez directs multiple staffers "to collagborate and develop an FIS financial feasibility report. Please finalize no later than August 5th...
July 16, 2013 JetBlue Sr VP Rob Land emails Ass't City Manager Suzanne Frick, asking if she might have time to meet on Aug. 5 to "allow me to share with you JetBlue's vision regarding a Customs presence at the Airport." Ms. Frick refers Mr. Land to Airport Director Rodriguez [with whom JetBlue's Land had already been working for the past six months.] "We rely on Mario to work out this kind of issue before the Mayor of City Manager get involved. Once we hear from Mario that he is good, we can schedule a meeting with everyone to discuss," Ms. Frick replied.
July 17, 2013: Airport Director Rodriguez instructs a staffer "to take lead on this study and complete as soon as practical...The study should discuss the overall benefits and disadvantages of an FIS. If the disadvantages outweight the benefits ways of mitigating these disadvantages..."
July 29, 2013: JetBlue's SR VP Rob Land writes Stacey Cassell in the Dept. of Homeland Security's Field Operation Office in Indianapolis. "Building on the success of our international growth on the east coast, JetBlue, in collaboration with leadership of the Long Beach Municipal Airport (LGB), is requesting that we meet with you or the appropriate person at CBP to formally begin the dialogue on opening a new facility with Federal Inspection Services to process internationally arriving customers, with as many as three arrivals at one time, at LGB." After an exchange of correspondence, a meeting with west coast CBP officials is arranged in September 2013 in Long Beach (further below.)
August 1, 2013, 1:00-1:30 p.m.: Discussion [appears to be a telephone call] calendared between JetBlue's Richard Smyth and Airport Director Rodriguez to discuss FIS [Federal Inspection Facility]
August 1, 2013, 2:00 p.m.-2:30 p.m: Meeting scheduled at City Hall between Airport Director Rodriguez, City Manager West and Assistant City Manager Frick at City Hall to discuss FIS [Federal Inspection Facility] at LGB.
August 1, 2013 [time uncertain]: Airport Director Mario Rodriguez sends a "to-for-from" memo to City Manager West for the Mayor and City Council, writing in pertinent part: "JetBlue Airways (JetBlue) is requesting that the Long Beach Airport (LGB) study the feasibility of developing a U.S. Federal Inspection Service (FIS) as a precursor to providing international service. Working within the bounds of the Noise Ordinance, Airport staff will develop a feasibility studey that will analyze the benefits and disadvantages of this facility and will evaluate whether or not it would enhance or reduce the value of LGB to the City...Obviously, LGB's main focus will be to retain the integrity of our Noise Ordinance, while developing a financially sustainable model that will not affect our current or future financial forecasts..." The memo makes no mention of potential risks to the Airport ordinance from enabling a new category of challengers (international operators) to the Airport ordinance.
September 3, 2013 JetBlue Senior VP for Gov't Affairs Rob Land sends a hard copy letter to Airport Director Mario Rodriguez, cc'd to 5th district Councilwoman Gerrie Schipske, stating the following:
...I am writing to thank you and your staff for the work we have begun with regards to securing a Customs facility for international airline service at Long Beach Municipal Airport.
...I am grateful for your cooperation thus far and look forward to continuing to partner with you and the City as we move from our discussions to engaging the federal government, a necessary partner, in this effort. Securing a customs facility will...help ensure the airport's full utilization within the limits of the governing ordinances...
Sept. 11, 2013: LB Airport Director and JetBlue officials meet in Long Beach with the Assistant Director, Border Security, from the U.S. Dept. of Homeland Security. to discuss options regarding a Federal Inspection Service facility at LB Airport.
October 18, 2013: Airport receives a "financial feasibility study" that it commissioned from Frasca & Associates, LLC. The study, conducted within the bounds of LB's Airport ordinance, assumed an average of 3 international flights per day and noted that "Given the slot regime at LGB, the development of FIS [a federal inspection facility] at the airport would generate, at most, a limited amount of incremental [emphasis in original] traffic. Rather, significant international activity would likely require some reduction in domestic activity." The study noted that if JetBlue scheduled an average of three international flights per day, and flew the average number of domestic flights it did between 2012 and 2013, and 60% of unused slots were used for international activity, Jet Blue would have to cut its domestic flights during the peak traffic months of June, July and August [to remain within LB's Airport ordinance] because there would be "insufficient unutilized slots to support the international flights." [Source: Frasca & Associates Oct. 18, 2013 financial feasibility study, p. 3.]
Oct. 23, 2013: JetBlue Senior VP Rob Land emails Airport Director Rodriguez, asking that the report be updated to double the number of international flights assumed in the original report:
[Oct. 23, 2013 Land email] JetBlue has stated affirmatively that we will begin our international operations with a minimum of six daily [emphasis in original] departures and grow from there, during certain peaks, to as many as 8-10 departures per day...I would ask if you could have Frasca update [a paragraph on p. 3 to reflect this]. Further, I'd appreciate it if the Frasco report begiinning would be updated to note that while JetBlue holds 32 slots, over each of the trailing twelve months since April, we have averaged only 25 in use per day, leaving us ample room to begin with six to seven international flights while not in any way whatsoever [emphasis in original] impacting domestic operations -- as the memo implies.
Accordingly, the report's text was changed to reflect six (not three) daily departures and the report's original language was changed to read: "[D]uring the peak months of June, July and August, either fewer international flights could be scheduled or the current domestic service levels would need to be cut." [to remain within the bounds of the Airport ordinance.]
The study was then conveyed to city management, then-Mayor Foster and all incumbent Council members in November 2013. It focused mainly on estimated Airport revenue and discussed costs/benefits for the Airport.
November 14, 2013: Airport Director Rodriguez sends City Manager West a memo for the City Council and Mayor which focuses on Airport revenue and costs. It recites that the Airport's "main focus is to retain the integrity of the Noise Ordinance" but makes no mention of any potential risks to property owners or to the City's property tax revenue base (the General Fund's largest revenue source) from enabling a new category of challengers (international operators) that could challenge the city's Airport ordinance.
Jan. 2, 2014: JetBlue sends Airport Director Rodriguez a company-drafted "term sheet" (updated from previously submitted drafts) which includes the following proposed provisions:
[Excerpts from JetBlue drafted Jan. 2, 2015 "term sheet"]
This Term Sheet sets forth certain preliminary terms and conditions of a proposed agreement ("Agreement") between JetBlue...and the City of Long Beach....for the design, financing, construction, operation and maintenance of a Federal Inspection Services Facility ("FIS") at LGB...to accommodate process international arriving passengers.
...Whereas LGB and JetBlue believe that a small to medium sized FIS (400 international arriving passengers per hour) could be constructed to accommodate projected growth in international destinations, while maintaining and observing LGB's Airport Noise Compatibility Ordinance No C-7320).
The term sheet outlines the current areas of agreement between JetBlue and LGB for a proposed new Agreement, which will allow for the financing, design, construction, and use of the new international arrivals facility.
This term sheet highlights the salient business terms for such Agreement. It is intended solely to facilitate the negotiations between the LGB and JetBlue, and is not an offer or lease or other agreement of any kind whatsoever. The terms set forth below shall not be binding by either party nor shall this term sheet create any obligation, legal, equitable or otherwise on either party ot negotiate or enter into any lease or any other agreement with respect to the development of a new international arrivals facility, unless and until the Agreement is duly executed by LGB and JetBlue. Until such Agreement is duly executed and effective, neither party shall be obligated to the other party in any manner whatsoever or liable to the other party for any damages or costs of any kind...
...Port of Entry
LGB and JetBlue have entered into discussions with United States Customs and Border Protection ("U.S. CBP") on the U.S. CBP designation of LGB as a "Port of Entry" and acceptance and staffing of a new Federal Inspection Service facility at the Airport.
LGB will use its best efforts to garner the necessary local, state and federal approvals to facilitate the project.
Facility Utilization/Permitted Uses:
The facility will be made available to all potential users; however, such users will be obligated to reimburse JetBlue for JetBlue-Share Project costs on a proportionate basis, and reimburse LGB for its LGB-Share Project Costs and all O&M costs on a proportionate basis.
LGB shall schedule and monitor availability and capacity in the FIS; however, preferential access shall be granted to JetBlue's scheduled flight activity, as may be adjusted fro time to time.
...The terms proposed herein shall not be effective or binding upon the LGB or JetBlue unless and until a definite agreement relating to these issues between the LGB and JetBlue are executed and delivered by all parties and these matters and the execution and delivery of such documents have been approved by the members of the Long Beach City Council.
A JetBlue staffer followed up with a Jan. 3, 2014 email to then-Airport Director Mario Rodriguez:
Happy New Year! I look forward to another productive year working with you and your team.
Attached is an updated version of the FIS term sheet. I think this is sufficient for [JetBlue official] to begin discussions with Council members. Please take a look before I send it over to [him]...
Airport Director Rodriguez replied in pertinent part:
...Hopefully you had a very happy new year also...Although we have to make some refinements, such as LGB cannot issue additional debt, the term sheet looks good. [LGB staffer] will be setting up a working Telecom to discuss and refine the terms...
LBREPORT.com has received no documents indicating that the "term sheet" was signed by the parties.
January 2014 Airport staffer invites a CSULB Professor Emeritus in Economics to submit a proposal to produce an "economic impact report" regarding international flights at LGB. In response, the Professor Emeritus tells Airport management that his proposal to conduct the study omits discussion of the impact of visitor expenditures on the Long Beach economy because the effect of adding a customs facility to enable international flights was expected to be small. (LBREPORT.com coverage here.)
In connection with this story, LBREPORT.com sought contact with and comment from now-exited LB Airport Director Mario Rodriguez. Mr. Rodriguez announced in April 2014 that he was leaving LGB to serve as Director of Indianapolis International Airport. Messages left with his office by LBREPORT.com seeking his input in connection with this report weren't returned.
LB City Manager Pat West hired as LGB's new Director, Mr. Bryant Francis, who began work in early 2015 after running the Shreveport [Louisiana] Airport Authority. He previously oversaw Palm Springs Airport during a period when it begin international flights.