Budget & Finance Committee forwards SFO 10‑year airline leases and multi-part bond package to full Board

The San Francisco Board of Supervisors Budget and Finance Committee on June 27 voted to forward three airport finance resolutions to the full Board: two 10‑year lease‑and‑use agreements with airlines at San Francisco International Airport (SFO) and a financing package to refund and refinance airport bonds.

Chair Connie Chan moved the items and the committee recorded a 2–0 roll call vote with Vice Chair Rafael Mendelmann joining Chan in support; Member Safae was excused. Clerk staff indicated the items will be placed on the Board of Supervisors agenda for June 27.

Airport officials said the 2023 lease‑and‑use agreements replace the 2011 agreements and will be offered to carriers operating at SFO for the 10‑year term beginning July 1, 2023. "The lease and use agreement is the mechanism that allows airlines to provide flight operations and rent terminal space at the airport," said Kathy Weidner of San Francisco International Airport. The airport told the committee the new agreement standardizes rent, fees and permitted uses and supports the airport's annual service payment to the city's general fund.

Kevin Cohen, assistant chief financial officer at SFO, described how airline revenues and nonairline revenues (for example, concessions and parking) support operating and capital costs under a residual‑rate methodology. He said the airport expects roughly $3,400,000,000 in terminal rental revenues and about $2,600,000,000 in landing fees over the 10‑year term — about $6,000,000,000 in airline‑sourced revenue in total — and that the agreement creates an operating reserve and capital investment fund (ORCEF) that is expected to provide more than $800,000,000 over 10 years. "The revenues coming from the airlines is valued at over 6,000,000,000 over the 10 year period," Cohen said.

Airport staff told the committee the ORCEF will be limited to lawful airport‑related purposes and may be used for shorter‑lived capital investments and cash‑funded items (for example, IT components, vehicles, fire alarm systems), to reduce the need for long‑term bond financing, and to stabilize airport operations during downturns. The airport said the first deposit to the ORCEF would be $250,000,000 on July 1. Staff also said certain uses, such as paying wages to workers not under direct contract with the airport, would not be allowable unless there is a direct contract with the airport; the airport committed to provide follow‑up confirmation in writing.

The third resolution summarized for the committee would authorize multiple financing actions for SFO, including the issuance of up to approximately $6,000,000,000 in refunding revenue bonds; up to $60,000,000 in special facilities bonds for fuel storage and delivery facilities; approximately $262,500,000 in special facilities bonds to refund hotel bonds; and approval of revolving lines of credit, term loans and commercial paper arrangements with an available principal amount in combination not to exceed approximately $600,000,000, along with other related financing approvals. A caller, David Pilpel, cited the BLA report and noted that the refunding bonds are estimated to produce net present value savings "just under $81,000,000," or about 1.27 percent, which exceeds the airport's 1 percent minimum threshold in its debt policy.

Budget and Legislative Analyst staff told the committee they had no updates to their prior reports and recommended approval. After brief discussion about recent operational incidents (a power outage and two airline "go arounds") — which airport staff characterized as a cable failure being addressed through a planned replacement contract and routine FAA‑reviewed go‑around procedures — the committee voted to forward all three items to the full Board with a positive recommendation.

Next steps: The items will appear on the Board of Supervisors agenda on June 27 for final consideration.