When AECOM paid a visit to the KCI selection committee Monday, the Los Angeles-based engineering firm was expected to argue that it can finance a single terminal at a big cost savings compared to an earlier arrangement Kansas City had considered with Burns & McDonnell.
AECOM, along with Turner Construction and Oaktree Capital Management, formed KCI Partnership, one of four consortiums making their case on Monday before a city selection committee for a design, build and finance contract to build a single terminal.
KCI Partnership believes its $1 billion single terminal concept for KCI would cost $462 million less over 30 years than the deal Kansas City contemplated with Burns & McDonnell before opening up the project to competitive proposals. A summary of the KCI Partnership proposal was obtained by The Star.
Ian McNamara, a spokesman for KCI Partnership, was not available to comment.
KCI Partnership builds its case by pledging that it can build a 35-gate, $1 billion terminal building with a financing structure that pays off the debt over 30 years with fixed annual payments of $69.8 million that include debt service and equity return.
That’s compared to $85.2 million, which was the maximum amount that the airlines would have agreed to repay project financing and other costs under a proposed memorandum of understanding between City Hall and Burns & McDonnell. That memorandum surfaced in May but never went into effect.
It’s not clear if a Burns & McDonnell concept would have maxed out at the $85.2 million figure; the firm had not yet finalized its design for a single terminal by the time City Hall in June decided to open up the KCI project to competition.
“Our proposal is based on an annual financial commitment from the airlines which could be as low as $58 million; down significantly from the airlines’ maximum annual debt payment commitment of $85.2 million,” Burns & McDonnell said in a statement. “As this is a qualifications based selection, we’ll continue to work with the stakeholders — the airlines, the City and the community — and look forward to developing the right project at the right price for Kansas City.”
The KCI Partnership summary indicated that it could obtain an interest rate of 3.99 percent, less than a percentage point above what the document points to for interest on airport revenue bonds, which is the typical way cities and airport authorities fund terminal projects. It is also putting $115 million in equity into the project.
The KCI Partnership proposal also gives three other options for terminal designs. One is a $1.3 billion option that, according to the proposal summary, adds an elevated walkway between the terminal and the airline gates that allow planes to taxi underneath. This feature, similar to the walkway from the main terminal to concourse A at Denver International Airport, is thought to improve airport efficiency.
The two other options are lower-cost alternatives that start with 25 gates and can be expanded later. The KCI Partnership’s analysis of KCI’s air traffic indicated that 21 gates were in use at peak hour demand, meaning KCI could conceivably operate initially with fewer gates and result in fewer operational costs. KCI Partnership’s projected lowest cost option is $872 million.
The KCI Partnership’s proposal summary also commits to reaching between 30 and 35 percent women- and minority-owned business participation both for the terminal’s design and construction work.
Kansas City’s solicitation for the airport project does not spell out goals for women- and minority-owned business participation goals, and won’t until a winning proposal is selected.
KCI Partnership’s goal is a lofty one; Kansas City, along with agencies including the Tax Increment Financing Commission and the Planned Industrial Expansion Authority, awarded 25 percent of its construction and professional service contracts to woman- and minority-owned businesses, according to the city’s human relations department’s 2016 annual report.
KCI Partnership’s proposal also says it would establish what it calls the KCI Legacy Fund, a $5 million loan guarantee program administered by Liberty Bank. The fund is meant to provide access to money for women- and minority-owned businesses and help new, small businesses get their affairs in order.
KCI Partnership will be the second firm to present to the KCI selection committee on Monday. The selection committee consists of Kansas City councilmembers Jermaine Reed and Jolie Justus, City Manager Troy Schulte, aviation department director Pat Klein, aviation department chief financial officer John Green and airport engineer Phil Muncy.
The first headed before the committee is led by Jones Lang LaSalle. The third is a team led by Edgemoor Infrastructure & Real Estate. Burns & McDonnell, the Kansas City firm that played a pivotal role in re-starting the KCI discussion, goes last.
This story has been updated to correct an earlier version to reflect that John Green is on the selection committee.