AGENDA STAFF REPORT

Agenda Item AGENDA STAFF REPORT ASR Control 11-001561
MEETING DATE:	11/08/11
legal entity taking action:	Board of Supervisors
board of supervisors district(s):	2
SUBMITTING Agency/Department:	John Wayne Airport (Approved)
Department contact person(s):	Alan L. Murphy (949) 252-5183

Subject: Int’l Service Set Aside, Incentive Program and CBP MOA

ceo Concur	County Counsel Review		Clerk of the Board
Concur	Approved Agreement to Form		Discussion
			3 Votes Board Majority

Budgeted: N/A		Current Year Cost: N/A		Annual Cost: N/A

Staffing Impact: No		# of Positions:		Sole Source: N/A
Current Fiscal Year Revenue: N/A
Funding Source: JWA Operating Fund 280: 100%

Prior Board Action: May 3, 2011, Item #40, Approve Memorandum of Agreement with U.S. Customs and Border Protection

RECOMMENDED ACTION(S):

1.	Find that: (i) Final EIR 582 and Addendum 582-1, as revised by Final Supplemental EIR 582, previously certified on June 25, 2002, accepted on December 10, 2002, and certified on October 19, 2004, respectively, have been examined in relation to the proposed projects; (ii) the proposed projects’ environmental effects were fully analyzed and disclosed in these CEQA documents and the proposed projects would not have any environmental effects beyond those analyzed and disclosed in these environmental documents; and, (iii) no further CEQA compliance is required for the proposed projects.
2.	Approve the proposed amendment to the Phase 2 Commercial Airline Access Plan and Regulation (“Access Plan”) for John Wayne Airport, Orange County (SNA) (“JWA”) to provide a capacity set aside of three (3) Class A ADDs for Commercial Air Carrier operations servicing international destinations, as reflected in Exhibit A.
3.	Approve the proposed JWA Air Service Development Incentive Program for Mexico, as reflected in Exhibit C.
4.	Authorize the Chair to execute a User Fee Airport Memorandum of Agreement with the United States Customs and Border Protection for inspectional services, as reflected in Attachment A.
5.	Authorize the Auditor-Controller to pay invoices, upon receipt.
6.	Authorize the Airport Director to execute future User Fee Airport Memorandum(s) of Agreement with the United States Customs and Border Protection ("CBP") for inspectional service within the following parameters: (1) a maximum of twenty (20) CBP full-time staff may be authorized; (2) CBP services up to and including seven (7) days per week between the hours of 7:00 am and 11:00 pm may be authorized; and (3) CBP equipment necessary to support up to and including twenty (20) CBP full-time staff may be authorized.

SUMMARY:

Approve the proposed amendment to the Phase 2 Commercial Airline Access Plan and Regulation (“Access Plan”) for John Wayne Airport, Orange County (“JWA” or “Airport”) to provide a capacity set aside of three (3) Class A Average Daily Departures (“ADDs”) for Commercial Air Carrier operations servicing international destinations; approve the proposed JWA Air Service Development Incentive Program for Mexico; authorize the Chair to execute a User Fee Airport Memorandum of Agreement (“MOA”) with the U.S. Customs and Border Protection (“CBP”) for inspectional services; authorize the Auditor-Controller to pay invoices upon receipt; and authorize the Airport Director to execute future User Fee Airport Memorandum(s) of Agreement with CBP within certain defined parameters.

BACKGROUND INFORMATION:

Proposed Amendment to the Access Plan To Provide A Capacity Set Aside of Three (3) Class A ADDs for Commercial International Service at JWA

Limitations on the Number of Average Daily Departures at JWA

One of the principal means of controlling aircraft noise at John Wayne Airport, Orange County (“JWA” or “Airport”) has been limitations placed upon the number of Average Daily Departures (“ADDs”) by Commercial Air Carriers using JWA. These restrictions have been adopted in resolutions of the Orange County Board of Supervisors (“Board”) and incorporated into various agreements between the County (as the airport proprietor) and its air carrier tenants. After 1980, these restrictions also became elements of various “access plans” adopted by the County, including the current Access Plan.

The ADDs are divided into separate “classes” based upon the noise characteristics of the aircraft permitted to operate within those “classes.” The “noisiest” class of ADD is designated in the Access Plan as “Class A.” The Access Plan (and the 1985 Settlement Agreement) defines a second quieter “class” of commercial aircraft operations based upon the noise characteristics of the aircraft, “Class E.”

Regularly Scheduled Commercial Users operating at JWA as Commercial Carriers may not operate a total of more than eighty-five (85) Class A ADDs and Regularly Scheduled Commercial Users operating at JWA as Commercial Cargo Carriers may not operate a total of more than four (4) Class A ADD cargo flights, for a total of eighty-nine (89) Class A ADDs in any Plan Year (January 1 through December 31). In addition to these Regulated Class A ADDs, the Airport Director may allocate a maximum of twelve (12) permanent Class E ADDs. The permitted ADDs are allocated among the Regularly Scheduled Commercial Users by a formula and process described in the Access Plan (and in the staff reports prepared in connection with the consideration and adoption of the Access Plan by the Board) and, as summarized below.

Allocation of Capacity at JWA

The County currently allocates Regular Commercial Air Carrier, Commercial Cargo Air Carrier and permanent Class E ADD allocations for a specified term (e.g., through December 31, 2015). See, Access Plan, Section 3.1. The County separately allocates Seat Capacity to the Qualified Air Carriers serving JWA for each Plan Year in order to serve two regulatory purposes of the County: (i) to provide the maximum feasible flexibility to the Qualified Air Carriers in selecting the mix of aircraft types used by them in their service at JWA; and (ii) to provide a pre-determined and fair mechanism by which Air Carrier capacity reductions can be effected if the County determines that reductions are necessary to ensure adherence to the million annual passenger ("MAP") limit at the Airport. See, Access Plan, Section 3.3. Although each Air Carrier is presumed to have permission to use the annual Seat Capacity allocations as provided in Section 3.3.1 of the Plan, the County requires annual Seat Capacity ratification in connection with each Plan Year allocation process. See, Access Plan, Section 3.3.2.

The County also reserves to itself the right to make allocations of supplemental operational capacity, whether by means of supplemental Authorized Departures, supplemental Seat Capacity, supplemental Commuter Passenger Capacity, or otherwise as it may deem appropriate. These supplemental allocations are often used in connection with the Plan Year allocation process. See, Access Plan, Section 4.

There is no allocation of ADDs to Qualified Commuter Carriers under the Plan. Rather, the County authorizes Passenger Capacity Allocations to Qualified Commuter Carriers for each Plan Year in order to respond to the needs and uncertainties of commuter operations at JWA. Allocations to Qualified Commuter Air Carriers are made each year, and are effective only for the Plan Year for which the allocations are made. No Passenger Capacity Allocations to Commuter Air Carriers may be carried forward beyond the Plan Year for which the allocations were made. See, Access Plan, Section 3.5.

The County currently reserves five hundred thousand (500,000) annual passengers of the total MAP Limitation for priority distribution to Qualified Commuter Carriers (“Commuter Passenger Capacity”). To the extent that a Commuter Passenger Capacity of less than five hundred thousand (500,000) annual passengers is allocated to Qualified Commuter Carriers during any Plan Year, or if, for any period of time, previously allocated Commuter Capacity is returned to the County, the Airport Director may consider the unused capacity for purposes of making supplemental allocations under Section 4. See, Access Plan, Section 3.5.1.

The Access Plan also designates four (4) Regulated Class A Authorized Departures for allocation to Commercial Cargo Carriers. In the event the County does not receive requests from Commercial Cargo Carriers for all four (4) Regulated Class A Authorized Departures during any Plan Year, the Airport Director may allocate a maximum of two (2) of the four (4) Class A ADD set aside for cargo operations on a supplemental basis to Commercial Air Carriers for a period of up to one (1) Plan Year. See, Access Plan, Section 3.6.3.

Proposed Modifications to the Access Plan Allocation Policies and Summary of Air Carrier Comment Letters

Prior to considering any important policy modifications to the Access Plan, it is the County’s practice to solicit comments from the Air Carriers in order to both frame the principle policy issues that are being considered and in order to ensure that a public process is followed with regard to the consideration of any policy modifications. The principle issues that have been, and continue to be, of concern to the County regarding any public process followed include:

(i)

It is important that the process followed be a credible process in which the Air Carriers know that the County will consider their views in an objective and fair manner.

(ii)

The County will continue to focus on maximum service to the air traveling public consistent with protecting fully its interests in ensuring the basic fairness of the capacity allocation process of the Access Plan.

(iii)

Capacity allocations and reallocations of ADDs are not, and must not be permitted to become, property rights or property interests of Air Carriers operating at JWA. The ADDs (and all other capacity allocations) are not transferable by the Air Carriers and no allocation or reallocation process should alter this long-standing basic premise of commercial operations at JWA in any respect.

As outlined above, and consistent with the County’s practices, on September 13, 2011, the Airport Director initiated a process by which he invited the Air Carriers to provide written comments on possible modifications to the current allocation policies at JWA in order to provide a capacity set aside of up to three (3) Regular Class A ADDs for commercial international service at the Airport. This process was initiated in order to assess whether an amendment to the current allocation policies in the Access Plan was appropriate to encourage and promote the use of the new international arrivals facilities at the Airport, to support the operation of commercial passenger air service by new entrant and incumbent Air Carriers to international destinations, to support the vision of JWA to be a world-class aviation gateway for business and leisure travel, and to ensure that capacity is available at the Airport for international service during the term of the Access Plan (through December 31, 2015).

In addition, the Airport wanted to revisit its existing allocation policies in order to ensure that the County continues to provide Air Carriers (both incumbent and new entrant) with flexibility and discretion in structuring their operations at JWA in the use of ADDs and related operating capacity while still ensuring that these policies are not interpreted or applied in a manner which circumvents, or is inconsistent with, the basic premise of capacity allocation fairness. Specifically, it is not the intent of the County that any modifications be made to the current allocation policies that could be applied in a manner which unfairly prejudices other authorized Air Carriers in the capacity allocation process of the Access Plan.

In order to facilitate Air Carrier review and comment on issues relating to the County's possible modification to the current allocation policies relative to international operations at JWA and the allocation of ADDs, Airport staff provided a description of the current allocation policies as well as the proposed draft amendment to the Access Plan. A copy of the Airport Director's September 13, 2011, letter and attachments are provided in Exhibit A to this ASR.

In summary, and as provided above, the proposed amendment would set aside up to three (3) Class A ADDs for Commercial Air Carrier operations serving international destinations. Under the proposed amendment, to the extent that less than three (3) ADDs designated for international service is allocated to Air Carriers during any Plan Year, or if, for any period of time, previously allocated international capacity is returned to the County, the Airport Director may allocate any unused capacity for operations serving domestic destinations on a supplemental basis for a period of up to one (1) Plan Year.

The proposed capacity set aside of three (3) Regular Class A ADDs for commercial international service at the Airport would be provided from ADDs that are currently under County control. Therefore, this proposed Access Plan amendment would not impact the capacity allocations for the upcoming 2012 Plan Year. The proposed amendment to the Access Plan is being considered by the Board in connection with a proposed Air Service Development Incentive Program for Mexico (“Incentive Program”), discussed in detail below. To the extent the proposed Incentive Program is approved by the Board, the three (3) Regular Class A ADDs set aside for commercial international service shall be allocated consistent with the terms and provisions of the Incentive Program through the term of the Program (through December 31, 2013).

The Airport received written comment letters from three (3) Air Carriers (Alaska Air, Southwest Airlines and United Air Lines) in response to the Airport Director's letter of September 13, 2011. Copies of the written comment letters are provided in Exhibit B to this ASR.

Two (2) of the Air Carriers, Alaska and Southwest, support modifications to the current allocation policies to provide a capacity set aside for commercial international service at JWA. Alaska Airlines submitted a simple written comment indicating that it “…has no objection to this international set aside proposal.” “Southwest also supports the proposed amendment to the Access Plan because it "believes it to be in the interests of the Customers of John Wayne Airport, as well as the Commercial Air Carriers and John Wayne Airport, itself, to fully utilize this infrastructure [the new international facilities], and thereby further enhance the economic impact that John Wayne Airport contributes to Orange County and the surrounding region.”

Southwest also suggests that additional language be added to the proposed amendment to the Access Plan in order to clarify that the set aside may be made for multiple Plan Years, rather than just a single Plan Year. Specifically, Southwest requests that the following language be added to the end of the first sentence of the proposed amendment: “. . . for such period of time as determined by the Airport Director, up to and including the term of the Access Plan (through December 31, 2015).” Staff, however, believes that the proposed amendment, as currently written, adequately specifies that the set aside may be made for multiple Plan Years in light of the language at the beginning of the first sentence which states, as follows: “During the term of the Plan, the Airport Director shall reserve a capacity of three (3) Regular Class A ADDs of the total Regular ADD capacity for priority distribution ….” In addition, the proposed Incentive Program calls for an allocation through December 31, 2015. Therefore, staff believes that additional language proposed by Southwest is not necessary.

The only Air Carrier that submitted comments that do not support modifications to the current allocation policies to provide a capacity set aside for commercial international service at JWA is United Air Lines. United opposes the proposed amendment because it believes that the amendment will “. . . further stratif[y] the allocation process.” In response to this concern, it is important to recognize that one of the ways the County ensures maximum operations and maximum service to the traveling public at JWA is by promoting and facilitating reasonable opportunities for all types of competitive service at JWA and maintaining fairness among all air carriers in the ADD allocation process (whether allocations are provided to Commuter Air Carriers, Commercial Air Carriers or Cargo Air Carriers and whether allocations are provided to incumbent or new entrant Air Carriers). By providing a set aside for international service at the Airport, the County will be furthering its existing policy by ensuring reasonable opportunities for all types of service at the Airport – including international service.

United also argues that “[a]ll services must be treated equally without distinction between domestic and international service for allocation purposes at the airport so the County ensures equal access. …. “ and that to do otherwise may be “. . . . inconsistent with federal policy.” Although staff understands United’s concerns, to some extent, it is important to emphasize that existing federal policies allow for the exact type of air carrier set asides that are being proposed by JWA in order to increase travel using an airport and/or to promote competition at an airport. Additional information regarding the federal policies is provided below in connection with the discussion of JWA’s proposed Incentive Program.

United Air Lines is also concerned that “[i]f there are greater than three services prescribed, [the County’s] proposal would put the County in a position of choosing winners and losers and in effect deciding a route case.” The County believes that this concern is without merit. The proposed allocation amendment is consistent with other allocation policies at the Airport that provide capacity set asides for Commuter Air Carriers and Cargo Air Carriers. All other allocation policies will continue to apply to the allocation of international capacity, including waiting list procedures and reallocation procedures. These provisions have been carefully tailored to ensure that the capacity set aside will not be limited to a type of carrier (such as a low-cost carrier), to a specific carrier or to a specific type or characteristic of service, such as size of aircraft or multi-class service. Again, all of the provisions of JWA's proposed amendment are consistent with federal policy.

In addition to these concerns voiced by United in opposition to the proposed amendment, United has a number of other specific recommendations that it suggests be clarified in the set aside proposal if the County’s proposed amendment moves forward. Staff believes that the majority of these concerns have been addressed adequately in connection with the proposed Incentive Program policies, discussed below. However, in order to ensure that each of United Air Lines’ concerns is adequately addressed, staff has provided a detailed response to each of United’s questions and has provided these responses in Exhibit D to this ASR.

Staff Recommendation

Staff has carefully considered the comments of the Air Carriers regarding the issues that were identified in the Airport Director's September 13, 2011 letter. After careful consideration of the issues and comments, staff recommends that the current capacity allocation policies at JWA be modified to provide a capacity set aside of three (3) Class A ADDs for international service at JWA. Further, to the extent that an international capacity of less than three (3) ADDs is allocated to Air Carriers during any Plan Year, or if, for any period of time, previously allocated international capacity is returned to the County, staff recommends that the Airport Director allocate the unused capacity for Commercial Passenger service at JWA on a supplemental basis for a period of up to one (1) Plan Year.

Proposed Air Service Development Incentive Program for Mexico

Federal Aviation Administration Air Carrier Incentive Program Guidance

For many years, airports throughout the United States have instituted air carrier incentive programs to enhance the service offerings available to their customers. More recently, airports are revisiting incentive programs in response to the recession and the resulting reduction in airline capacity and increased competition for air service. Federal law and the Federal Aviation Administration’s (“FAA”) policies and procedures concerning the use of airport revenue and its policies concerning rates and charges provide guidance concerning the permissible provisions and scope for these incentive programs. To help clarify the requirements applicable to air carrier incentive programs, the FAA issued an Air Carrier Incentive Program Guidebook on September 15, 2010. The Guidebook provides a concise list of permissible and impermissible incentives.

In summary, the FAA allows promotional incentives to air carriers for new service to increase travel using an airport and/or to promote competition at an airport. FAA defines new service as: (a) service to an airport destination not currently served; (b) non-stop service where no non-stop service is currently offered; (c) new entrant carrier; and/or (d) increased frequency of flights to a specific destination.

FAA distinguishes between subsidizing air carriers and the waiving of fees as incentives. A subsidy is the direct payment of airport revenue to a carrier or to any provider of goods or services to that carrier, in exchange for additional service by the carrier. An incentive is any fee reduction, fee waiver, or use of airport revenue for acceptable promotional costs, where the purpose is to encourage an air carrier to increase service at the airport. An airport may only provide incentives to an air carrier in connection with any air carrier incentive program; subsidies cannot be provided.

Other important guidance provided by the FAA includes the following: (i) consultation with the FAA or the air carriers operating at the airport is not required before instituting an incentive program; (ii) incentives may not be limited to a type of carrier (such as a low-cost carrier), to a specific carrier, or to a specific type or characteristic of service, such as size of aircraft or multi-class service; (iii) incentives may also not be limited to signatory carriers. Further, incentives may only be offered for one year for new entrants and for two years for all carriers. However, the air service incentive program itself may run for a longer period of time; (iv) landing fees or terminal rents may be rebated, and this will not constitute a direct subsidy; (v) the cost of providing incentives to one or more carriers cannot affect the rate base for air carriers not participating in the incentive program without their express permission; and (vi) airport revenue may be used for a proportionate share of marketing and advertising for new service, but only when the airport is included in the advertising with the carrier.

The Cost of Federal Inspection Services at Port of Entry Airports Versus User Fee Airports

There are essentially two types of international designations for airports in the U.S.: “Port of Entry” and “User Fee.” In order for an airport to be designated as a Port of Entry, the facility must meet certain minimum criteria including, but not limited to, having at least 15,000 international air passengers or 2,000 scheduled international arrivals. Importantly, once an airport has been designated as a Port of Entry airport, costs associated with inspection equipment, personnel and the U.S. Customs and Border Protection (“CBP”) services are the responsibility of the federal government. At User Fee airports, however, the airport operator is responsible for all costs associated with federal inspection services, including all staffing, equipment and maintenance.

CBP has advised that, at least initially, JWA must operate as a User Fee airport because the volume of international service will not have met the minimum threshold for Port of Entry status. In order to help defray the substantial costs associated with CBP services, and consistent with practices at other User Fee airports, any Commercial Air Carrier utilizing JWA’s facilities for international destinations will be required to pay the costs associated with its operations. For this reason, it will necessarily be more expensive for Air Carriers to operate international service at JWA, a User Fee airport, than it would for the Air Carrier to operate at a Port of Entry airport, because part of its costs of operation will necessarily include the reimbursement of CBP for its services. These CBP services, staffing levels and associated costs are discussed in more detail below.

As a result, any JWA program intended to encourage Regularly Scheduled Air Service to Mexico should include an incentive to the Air Carriers that is substantial enough to offset, at least partially, the additional costs to initiate international service at the Airport that are not present at a Port of Entry facility.

Proposed Air Service Development Incentive Program: Mexico

The proposed JWA Air Service Development Incentive Program for Mexico (“Incentive Program”) has been designed to encourage and promote the operation of commercial passenger air service by new entrant and incumbent air carriers to Mexico. A copy of the proposed Incentive Program is provided in Exhibit C. The Incentive Program is in compliance with state and federal laws and complies with all of the FAA requirements for air carrier incentive programs. The Incentive Program is also consistent with all provisions of the Settlement Agreement and Access Plan.

The goals of the Incentive Program include providing new non-stop air service between JWA and Mexico, promoting competition at the airport, increasing the number of passengers utilizing JWA (within the parameters defined in the Settlement Agreement and the Access Plan), maximizing utilization of new international arrival facilities at JWA, increasing non-aeronautical revenue generated at JWA, and serving Orange County passengers who are currently flying through other regional airports that offer non-stop service to Mexico.

The Incentive Program provides a maximum of three (3) incentive packages. Only one (1) incentive package will be offered for each of three (3) new non-stop destinations in Mexico not served from JWA at the time the new service is proposed. New non-stop service introduced to markets with existing service or any new non-stop service introduced to Mexico after the initial three (3) markets will not qualify for an incentive package.

Each incentive package will include a rent credit of three hundred thousand dollars ($300,000) for terminal space costs associated with international arrival facilities and an allocation of one (1) Regular Class A ADD for the current term of the Access Plan (through December 31, 2015).

In order to qualify to receive one or more incentive package(s), the proposed service must: (1) be operated non-stop from JWA to the proposed airport in Mexico; (2) be operated continuously for a period of twelve (12) months from the date of initiation of service; (3) be operated an average of five (5) days per week over the first twelve (12) months of service; (4) be initiated during the period from June 1, 2012, to December 31, 2013; and (5) comply with all applicable airport noise and access regulations, including all provisions of the Access Plan.

In addition, the proposing Air Carrier must have obtained, or be able to obtain before the proposed start date of the service, necessary route authority from the United States and Mexico, and must comply with all statutory and regulatory requirements imposed by the Governments of the United States and/or Mexico for the operation of the proposed service.

If approved, the initial incentive package allocation process will occur on December 16, 2011. A waiting list will be maintained for persons desiring to participate in the Incentive Program at JWA that are not allocated an incentive package during the initial allocation process.

In order to ensure compliance with the terms and conditions of the Incentive Program, the Program includes specific requirements that all Air Carriers conducting operations under the Incentive Program must have an approved operating or lease agreement with the County further defining that person’s obligations to the County with respect to its operations at JWA, have a signed Commitment Letter with the County regarding participation in the JWA Incentive Program, comply with all state and federal laws and regulations and any existing or future agreement between the County and the U.S. Government or governmental authority relating to the operation or maintenance of the Airport. In addition, the Incentive Program clarifies that the Program may be terminated if it is determined to violate applicable laws, regulations, or any assurance made by the Court to the U.S. Government in connection with the receipt of federal grants-in-aid or the approval of Passenger Facility Charges.

The Incentive Program also provides penalties and prohibitions for failure to comply with the terms and conditions of the Program including, but not limited to losing any and all operating privileges received under the Incentive Program, disqualification from further participation under the Incentive Program, and reimbursement to JWA for all credits, including monetary and allocation credits received under the Incentive Program.

Staff Recommendation

Based upon the discussions provided in this ASR, including the importance of utilizing the new international facilities at the Airport, and the terms of the proposed Incentive Program, staff recommends that the Board approve the JWA Air Service Development Incentive Program for Mexico, as reflected in Exhibit C.

Proposed User Fee Airport Memorandum of Agreement with U.S. Customs and Border Patrol

On May 3, 2011, the Board approved a Memorandum of Agreement (MOA) with CBP to support regularly scheduled commercial passenger service between JWA and destinations in Canada. The Acting Los Angeles Area Port Director for CBP has informed JWA that a new MOA must be submitted by the County in order for Regularly Scheduled Air Service to Mexico to commence at the Airport. A complete copy of the proposed MOA is provided in Attachment A.

The proposed MOA outlines a specific number and schedule of staff to be provided by CBP. The staffing level and schedule reflect certain assumptions that have been made with respect to aircraft type, load factor and flight arrival times. Specifically, this MOA calls for ten (10) full-time staff to support air service between the hours of 8:00 am and 5:00 pm, Monday through Friday. CBP has provided the following costs associated with this staffing plan:

For one (1) full-time CBP personnel, the cost will be $140,874 per person for the first year and $123,438 per person for succeeding years. For ten (10) full-time CBP personnel, the cost is estimated to be $1,408,740 for the first year and $1,234,380 for succeeding years.

Automatic Data Processing equipment costs per officer of $25,000 to $45,000 for the first year and $15,000 to $35,000 for succeeding years. For ten (10) full-time CBP personnel, the equipment costs are estimated to be $250,000 to $450,000 for the first year and $150,000 to $350,000 for succeeding years.

One CBP vehicle at $25,000 per year.

Consistent with the MOA, CBP will charge the Airport on a quarterly basis for all fees incurred. While these fees are agreed to be flat rates, CBP advises that they may be adjusted as costs and circumstances change. All costs associated with CBP staffing and equipment would ultimately be charged to, and reimbursed by, the Carrier(s) providing international air service at JWA on a prorata basis relative to their level of service.

It is foreseeable that, over time, the type of aircraft used in such service, as well as passenger levels and flight times may change, necessitating an adjustment in CBP staffing levels, schedules, and /or equipment. To ensure that CBP and the Airport can make such changes in an efficient manner and with a minimum of impact on the traveling public, staff recommends that the Board authorize the Airport Director to execute future MOA(s) with CBP. Specifically, the Airport recommends that the Airport Director be authorized to execute MOAs within the following parameters: (1) a maximum of twenty (20) CBP full-time staff may be authorized; (2) CBP services up to and including seven (7) days per week between the hours of 7:00 am and 11:00 pm may be authorized; and (3) CBP equipment necessary to support up to and including twenty (20) CBP full-time staff may be authorized. In the event that changes to international air service and, subsequently to CBP inspectional services, exceed these parameters, the Airport would return to the Board for further direction and action.

Staff Recommendation

Based upon the discussions provided in this ASR and the terms of the proposed MOA with CBP, staff recommends that the Board approve the proposed User Fee Airport MOA between the CBP and the County, as reflected in Attachment A, and authorize the Auditor-Controller to pay invoices upon receipt. Further, the Airport recommends that the Board authorize the Airport Director to execute future MOAs with CBP, within specific defined parameters, which become necessary to accommodate changes in the nature of international air service at JWA.

Conclusion

In conclusion, after careful consideration and based upon the discussions provided in this ASR, staff recommends that the Board take the following actions:

(1)	Approve the proposed amendment to the Access Plan for JWA to provide a capacity set aside of three (3) Class A ADDs for Commercial Air Carrier operations servicing international destinations, as reflected in Exhibit A;
(2)	Approve the proposed JWA Air Service Development Incentive Program for Mexico, as reflected in Exhibit C.
(3)	Approve the proposed User Fee Airport Memorandum of Agreement between the U.S. Customs and Border Protection and the County of Orange, as reflected in Attachment A, and authorize the Auditor-Controller to pay invoices upon receipt.
(4)	Authorize the Airport Director to execute future MOA('s) with CBP, within defined parameters.

CEQA COMPLIANCE

Final EIR 582, Addendum 582-1 and Final Supplemental EIR 582 previously certified on June 25, 2002, accepted on December 10, 2002, and certified on October 19, 2004, respectively, have been prepared for the Settlement Agreement Amendment and Settlement Amendment Implementation Plan ("proposed projects"). The Board is required to examine the subject project to determine whether its environmental effects were fully analyzed and disclosed in these previous CEQA documents and whether the subject project would have any environmental effects beyond those analyzed and disclosed in the previous environmental documents. If The Board concurs, no further CEQA compliance is required as noted in Recommended Action #1.

FINANCIAL IMPACT:

The Airport reserves will be used to fund up to $900,000 for this Incentive Program. The Incentive Program’s rent credits to participating airlines will help defray additional costs of CBP associated with international flights. By providing incentive credits, JWA hopes to encourage competition and increase travel that will generate additional revenues and offset the lost revenues from the credits. These credits are only for the first year and will only be provided after a 12 months period of continuous operations.

STAFFING IMPACT:

N/A

EXHIBIT(S):

Exhibit A:     Letter and Attachments from Airport Director to Air Carriers, dated September 13, 2011, and Proposed Access Plan Amendment

Exhibit B:     Letters Received from Air Carriers in Response to Airport Director Letter, Dated September 13, 2011

Exhibit C:     Proposed John Wayne Airport Air Service Development Incentive Program: Mexico (June 1, 2012-December 31, 2013)

Exhibit D:     Responses to Questions from United Air Lines Concerning Proposed Amendment to Provide an Air Carrier Set Aside for Commercial Operations to International Destinations

ATTACHMENT(S):

Attachment A: Proposed User Fee Airport Memorandum of Agreement between the U.S. Customs and Border Protection and the County of Orange