Hawaii 2022 Regular Session

Hawaii Senate Bill SB2402 Compare Versions

Only one version of the bill is available at this time.

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1	1	THE SENATE S.B. NO. 2402 THIRTY-FIRST LEGISLATURE, 2022 STATE OF HAWAII A BILL FOR AN ACT relating to concessions. BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
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3	3	THE SENATE S.B. NO. 2402
4	4	THIRTY-FIRST LEGISLATURE, 2022
5	5	STATE OF HAWAII
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7	7	THE SENATE
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9	9	S.B. NO.
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11	11	2402
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13	13	THIRTY-FIRST LEGISLATURE, 2022
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17	17	STATE OF HAWAII
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31	31	A BILL FOR AN ACT
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37	37	relating to concessions.
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43	43	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
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47	47	SECTION 1. The legislature finds that like airports on the mainland, 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 on the mainland 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 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 one time going 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. Congress provided direct relief to airlines, and while the department of transportation expeditiously utilized the federal 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, a position that was strongly advocated in June 2021 for all mainland 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 mainland airports in times of crisis. While it 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] by verbal agreement, or both: (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 is anticipated or 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 recoupment for the amount lost as may be applicable for the period that the concessionaire has been in business; provided that the recoupment may periodically include one or more of the following: (A) Entering into a new contract; and (B) Modifying the terms of any type of existing contract, including without limitation holdover agreements, revocable permits, or by verbal agreement; 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. (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 the contract shall not be more than twenty-five 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 upon its approval. INTRODUCED BY: _____________________________
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49	49	SECTION 1. The legislature finds that like airports on the mainland, 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.
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51	51	The legislature further finds that unlike Hawaii, some airports on the mainland 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 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.
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53	53	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.
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55	55	The legislature recognizes airport concession revenues are very important. Historically, airport concessions have averaged about fifty per cent of airport operation revenues, and one time going as high as seventy per cent.
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57	57	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.
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59	59	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. Congress provided direct relief to airlines, and while the department of transportation expeditiously utilized the federal 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, a position that was strongly advocated in June 2021 for all mainland airports by national organizations such as American Association for Airport Executives, Airports Council International North America, and the Airport Restaurant and Retail Association.
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61	61	The intent of this Act is to give the department of transportation flexibility and discretion to grant relief like other mainland airports in times of crisis. While it does not mandate that the department of transportation provide any relief, it gives the department the option to consider all types of relief opportunities.
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63	63	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.
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65	65	SECTION 2. Section 102-10, Hawaii Revised Statutes, is amended to read as follows:
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67	67	"§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] by verbal agreement, or both:
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69	69	(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
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71	71	(2) A significant hardship is anticipated or 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 recoupment for the amount lost as may be applicable for the period that the concessionaire has been in business; provided that the recoupment may periodically include one or more of the following:
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73	73	(A) Entering into a new contract; and
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75	75	(B) Modifying the terms of any type of existing contract, including without limitation holdover agreements, revocable permits, or by verbal agreement; 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.
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77	77	(b) Subsection (a) shall not apply:
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79	79	(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
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81	81	(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.
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83	83	(c) For airport concessions, the term of the contract shall not be more than twenty-five years, which shall include the remaining term of the contract and any extension thereof.
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85	85	(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.
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87	87	(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:
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89	89	(1) A reduction of:
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91	91	(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
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93	93	(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;
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95	95	(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;
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97	97	(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;
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99	99	(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;
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101	101	(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
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103	103	(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)."
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105	105	SECTION 3. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
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107	107	SECTION 4. This Act shall take effect upon its approval.
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111	111	INTRODUCED BY: _____________________________
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121	121	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. The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.
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127	127	Report Title:
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129	129	DOT; Airport Concessions; Substantial Hardship; Contracts
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133	133	Description:
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135	135	Provides the department of transportation with more flexibility and discretion to address substantial hardship situations that impact airport concession contracts.
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143	143	The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.