Business

‘Original sins’: Early errors erode KCI project perception, progress as deadlines loom

The man who started the drive for a new Kansas City International Airport now accepts blame for mistakes the city made right out of the gate in what has turned into a turbulent six-year quest.

Former Kansas City Aviation Director Mark VanLoh now says simply: “It was me. I take full responsibility.”

VanLoh, speaking to The Star from Tulsa, Okla., where he now runs the Tulsa Airport Authority, admits that in 2011 he underestimated how much the public liked the horseshoe terminals built in 1972.

He wasn’t alone among city officials in misjudging the public’s resistance to change. And the city’s failure on that count is one of the original sins in the struggle to build a new single terminal at KCI.

The other was that city leaders were never able to counter misinformation about how to pay for the new $1 billion airport.

Public aviation bonds have been tapped by dozens of cities over decades to build airports. They pose no risk to taxpayers — they’re paid off by fees on airlines and travelers — yet city leaders have never mounted a serious campaign to convince taxpayers they won’t be on the hook.

Other missteps have amounted to six years of bungling the KCI discussion.

An early plan moved the new airport 4 miles closer to downtown, until city officials realized it would take $500 million to build new access roads.

The current KCI was labeled vulnerable to terrorists, but then the Transportation Security Administration downplayed that.

The airlines questioned the need for a new terminal, then completely reversed course.

“This process appears to have been snakebitten from the beginning,” said veteran campaign consultant Steve Glorioso. “It’s never moved in a straight line. So the public is left with a scene of uncertainty and confusion, which is not what you want.”

Now, city leaders armed with a new proposal are beating a path toward finally putting the matter on the ballot for a November vote. But, yet again, they’re enduring missteps in trying to get there.

Burns & McDonnell steps forward

The latest attempt is an effort to atone for the original sin of not convincing taxpayers that aviation bonds are a safe way to finance the airport.

In late March, four Kansas City Hall leaders met with Burns & McDonnell executives at the River Club, a historic members-only restaurant on Quality Hill overlooking the city’s old airport.

That’s where and when the four — Mayor Sly James, City Manager Troy Schulte, Councilwoman Jolie Justus and Aviation Director Pat Klein — learned that the engineering company had a plan to design, build and privately finance a single terminal at KCI.

One benefit of the private-financing model stuck out: Officials could tell voters that they’re not on the hook for a dime toward improvements at KCI.

Bond buyers consider airport bonds highly rated because of their remote risk for default. No major airport has defaulted. And even if the bonds failed, investors are left holding the bag, not taxpayers.

Even if an airline goes out of business, which has happened at KCI previously, other airlines pick up the debt payments.

Justus said the city has never been able to convince the public of that basic fact, in part because Kansas Citians have to vote on airport revenue bonds for major upgrades to KCI.

Most airports don’t need such a public mandate, but Missouri law requires a vote to issue public airport bonds, the product of an unusual and long-ago wrinkle embedded in the Missouri Constitution.

Justus said she believes voters link a visit to the ballot box with an obligation to pay up with their taxes.

“People think if they’re voting on something, it will hit their pocketbook,” she said. “People don’t trust the government right now. I’ve been in public hearings where people have stated that airports are financed by airlines and there is absolutely no general fund revenue that is going to go to this. People say, ‘I know you say that, but that’s not possible.’ 

The Burns & McDonnell proposal was made public in May, but a messy rollout of the plan injected a new set of concerns.

James described Burns & McDonnell as the only company to step up with a plan, an explanation that lasted a short while before AECOM, a major aviation engineering company, said it was interested in floating its own idea.

James and Schulte then decided to accept outside proposals on a three-week time frame, but said publicly that Burns & McDonnell would get a last look at all offers and an opportunity to match the best one.

City Hall then reversed that position when lawyers said such an approach could leave Kansas City vulnerable to a lawsuit.

“There’s no question we had a rocky start to this,” Justus said.

Now final offers are due Aug. 10, only two weeks before the council has to pick a path forward by an Aug. 24 deadline to put the item on the November ballot.

They also have to consider a public-financing alternative proposed by Kansas City Councilwoman Katheryn Shields, which would essentially put city leaders back on square one in the financing debate. The ordinance comes up for council debate Wednesday.

For City Hall, the stakes are quite high.

Schulte said if the city can’t move ahead soon with a new terminal, it would likely resort to some type of renovation. That’s assuming the airlines would agree to it, but they’ve said they won’t.

Just two weeks ago, Southwest Airlines emphasized in an email to the city that “the current airport layout creates serious operational and customer experience challenges that would be solved by the new single terminal. As you know, airlines rarely agree on something, but in the case of KCI, we are currently in agreement on this.”

Said Schulte: “If the airlines don’t pay for renovations, we are in a world of hurt.”

At the beginning

Airports are difficult issues in some cities; Denver and San Diego endured long-in-the-tooth airport projects.

Airports are expensive, they require coordination with federal agencies, and they’re facilities like sports stadiums that have nostalgic value for residents.

But when the KCI discussion started in earnest in 2011, VanLoh seemed to describe the march toward a single terminal as an inevitable outcome.

He panned KCI as a “three-ring circus” in reference to its three-terminal design, which he said no longer effectively served a consolidating airline industry.

VanLoh’s approach is now widely seen as tone-deaf and arrogant; James recently said that the Aviation Department’s original single terminal talk was clumsy.

VanLoh was unaware of Missouri’s requirement to vote on issuing airport bonds.

“To be honest with you, I did not know that,” VanLoh said. “I think Missouri is one of a handful of states that require a vote on revenue bonds.”

VanLoh’s approach steeled the resolve of critics who would emerge on the KCI debate, those who felt like City Hall was going to foist airport expenses upon residents.

It led to an outcry of residents who felt that KCI’s decentralized security checkpoints, which allow travelers to get through faster than larger airports where the checkpoints are consolidated, were a major factor in the airport’s convenience.

Among those critics was Dan Coffey, who in recent years has emerged as a persistent City Hall gadfly against its major priorities.

Coffey and other residents formed a group called Friends of KCI, which would later become Citizens for Responsible Government. They pushed a 2014 initiative petition that prompted a City Council pledge to hold an election on any major airport improvements, regardless of public or private financing. That’s one reason an election is now so important.

Coffey said his group didn’t trust Kansas City’s claims about the need for the new terminal. He added that he believed the city would force it on the public, whether they wanted it or not.

“That’s when the hair on the back of my head went up,” he now says. “We didn’t like that attitude.”

Critics also voiced their suspicion that, much like with the Power & Light District, the city would have to fork over bundles of taxpayers dollars if KCI somehow failed to produce enough revenue to cover debt payments to investors.

Schulte now acknowledges that the Power & Light District, which requires annual payments in the neighborhood of $10 million to bondholders because the downtown entertainment district doesn’t produce enough revenue on its own, may be a legacy that taints the KCI discussion.

City Hall’s take-it-or-leave-it approach at the time was a sign of its disconnect with public sentiment for KCI.

“I misjudged the level of passion there is about the airport in this community from everybody,” Schulte told The Star recently. “It doesn’t matter whether you use the airport or are a heavy user of the airport, everyone in this town has an opinion on the airport. And I completely missed that.”

VanLoh acknowledges he didn’t properly gauge the public’s interest in the airport.

Schulte “is connected politically and could hear the backlash,” VanLoh said. “I was talking to the business community and not really hearing that. We should have taken it more seriously than we did.”

Other missteps only widened the gap between city officials and the public.

The idea of moving the airport 4 miles closer to the heart of the city, near Missouri Highway 152, had some appeal. But then City Hall learned that the Missouri Department of Transportation didn’t have the $500 million needed for highway improvements.

So the focus for KCI went back to building atop Terminal A, a plan that has been mothballed since 2014.

In April 2013, VanLoh struck a contract with public relations firm Global Prairie to help sell the idea of a single terminal to voters. Among the concerns the public relations campaign centered on was security issues with the aging airport.

Not long after, James formed a citizens advisory group to study KCI and various ideas of what to do with it through a series of meetings.

The committee eventually issued a recommendation for a single terminal, but it was an uneven process. Stakeholders who testified before the group at times refuted some of City Hall’s central claims.

For example, John Della Jacono, who at the time was a security director for the Transportation Security Administration, testified that KCI’s current layout worked fine for security purposes and even had advantages over other airports.

Kevin Koster, a marketing executive who served on the 24-member advisory group, came away still questioning the city’s case for a single terminal.

“When need drives a proposal, the proposal is much better,” Koster said. “It’s much easier to get support for it because it’s need driving the proposal. (The city) is trying to find the need for the proposal, and that’s why they’re struggling with it.”

Southwest Airlines executive Ron Ricks also initially downplayed the need for an expensive new terminal, saying it could drive up costs for the airlines that lease gates from KCI, ultimately leading to less service.

Schulte now says Southwest’s initial position on KCI stalled progress toward a single terminal for two years.

A Southwest Airlines spokesman told The Star that the company was originally unsure about the need for a new terminal or even renovations.

Then the airlines started discussing their lease at KCI, set to expire in April 2014, which led to lengthy talks about future improvements, Southwest spokesman Dan Landson said in an email.

That involved long-range forecasting of enplanements at KCI through 2030 and how many gates KCI would need, and how that would affect existing terminals and possible new layouts.

“As we worked through this process, we began to realize that the best option was, in fact, not to renovate the existing structure, but to begin with a clean slate and build a new single terminal that would exceed existing customer experience levels and meet and surpass the needs of how airlines operate today and in the future,” Landson said.

City Hall’s momentum toward a single terminal got a boost when Southwest Airlines reversed course and agreed to a single terminal concept in April 2016. A coalition of airlines committed to an arrangement using long-term leases to help finance a single terminal that would cost an estimated $964 million.

All that momentum stopped in May 2016 when James announced he was hitting the pause button on a vote later that year on KCI. He had seen polling that showed only 39 percent of respondents thought a single terminal should be a big priority.

It was a demoralizing realization for a city that had pushed hard for a new terminal, only to learn it hadn’t convinced the public.

Crunch time

August is the crucial month for KCI.

Final financing proposals are due Aug. 10. And there’s yet another twist for the council to navigate: Proceed with the private financing concept, or take up the ordinance by Councilwoman Shields to use public airport bonds.

Shields has championed resorting to the public financing model, saying it would keep costs down. If the council goes with the public financing route, it puts the city back in the position of explaining the absence of risk for taxpayers.

Either case leaves little time for the council to settle upon the right path forward before an Aug. 24 deadline to put a question on the November ballot. It also truncates a campaign, one that may require educating a skeptical public to achieve the result City Hall seeks.

Glorioso thinks it’s risky to push for a November vote.

“With the deadline for proposals coming within days of the deadline for a November ballot measure, I think it would be a mistake to go in November,” Glorioso said. “April makes more and more sense.”

Others, especially the airlines, think a November election is crucial, because construction costs will only continue to rise.

Greg Graves, the recently retired CEO of Burns & McDonnell, said the city was right to extend the competitive process to other companies.

“I’ll be extremely disappointed if the city doesn’t pick a winner from the process and have it ready for the voters to decide on in November,” Graves said. “And I fear that, as someone who loves my town, if it is pushed beyond the end of this year, we may be in for a long waiting period.”

Steve Vockrodt: 816-234-4277, @st_vockrodt

Lynn Horsley: 816-226-2058, @LynnHorsley

Looking ahead: timeline and options

June 28: The City Council’s finance and airport committees will debate Katheryn Shields’ proposed ordinance calling for a Nov. 7 election on airport revenue bonds for a new single terminal.

This would involve public financing, in contrast to the Burns & McDonnell private financing proposal. But none of the financing options involves general taxpayer dollars.

July 27: Firms with airport design expertise must submit qualifications, detailing why their new terminal plan is the best. Burns & McDonnell is expected to submit, and AECOM and others may as well.

A selection committee will review the proposals and, depending on how many ideas are submitted, narrow the field.

Aug. 10: Finalists will be asked to submit their private financing approach, unless the council has already opted for Shields’ public financing approach.

Aug. 24: The council must decide on final ballot language to meet the deadline for a Nov. 7 election.

Related stories from Kansas City Star

  Comments