The Buzz

The facts, faces and hum of local politics with Steve Kraske and Dave Helling

Paying for KCI -- part two

07/29/2013 6:00 AM

07/26/2013 4:45 PM

The Show-Me Institute has posted a follow-up to our discussion

, earlier this week, of the cost to redeem $1.5 billion in bonds if Kansas City decides to pursue a new single-terminal airport.

To review: SMI thinks debt service would cost $68 million annually; we think it might be closer to $70 million, at least. With five million annual passengers, that means $14 per passenger — a lot, we said, but perhaps not impossible to raise.

(Again, see

Lynn Horsley’s story

: “KCI’s overall cost per departing passenger is about $5, which is low compared with other airports, where costs per passenger can range from $18 to more than $35.”)


SMI says the current $4.50 passenger facility charge is already at its cap, which we noted in our original story. What it doesn’t say is that the White House FY 2014 budget proposes

raising the cap to $8 per passenger (some airline executives don’t want any cap at all


So let’s run some rough numbers, based on a five million passenger-per-year average:

• Lifting the PFC to $8 per passenger would raise $17.5 million.

• Raising the cost of parking 20 percent would raise $9 million.

• Raising concession revenue by 33 percent would raise $1 million.

• Cutting personnel costs 10 percent would raise $3 million.

That’s $30.5 million a year.

That would leave a target of $39.5 million annually from landing fees, facility rentals, and other costs — attributed to airlines — that would be passed on to travelers in higher ticket prices.

That would come to around $8 per passenger per year.

It’s a real stretch, to be sure.

It might be hard for the airlines, and passengers, to swallow, as the SMI points out. And any drop in the number of passengers would endanger that financing.

But paying the bill, city officials have told me, would not be


The government could refuse to raise the PFC cap, of course, making the financing even more difficult. Republicans generally don’t like the idea of a higher cap.

At the same time, the airport might be able to reduce construction costs below $1.2 billion, or receive federal help, or stretch out payments, or do any number of things to cut the $70 million annual debt service.

(For comparison, the airport’s total operating revenue in 2012 was about $138 million. Adding another $70 million would be, again, about a 50 percent hike.)

One of the most important tasks for the mayor’s study committee is to take a look the numbers — including the SMI estimates, by the way — and reach a reasonable understanding of how an airport improvement project might be funded.

And, to state the obvious: financing can’t possibly work unless the airlines agree to collect more from their ticket-buyers. Additionally, while Washington doesn’t have to provide direct funding, raising the PFC cap is almost as essential.

Ultimately, though, bond buyers will determine if the financing structure is viable. The more important threshold for voters is deciding if the returns from a new airport are greater than the cost of the investment.



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