Development

Privatize KCI? The question doesn’t die

Kansas City voters will be asked April 4 to issue $800 million in debt for infrastructure projects, but critics wonder if there’s a better way to drum up the money without hiking property taxes: Sell the Kansas City International Airport.

“As a businessman, if I got myself in a situation like the city has, the first thing I would do is rather than incur more debt, I would look to see if there’s anything I can turn into cash,” said Dan Coffey, a spokesman for government watchdog group Citizens For Responsible Government and a frequent opponent of City Hall.

Privatizing the airport is not an idea out of left field; Kansas City leaders discussed doing that in 1999 and again in 2009. In Europe, many airports are run privately. And it’s a fresh topic under the President Donald Trump administration.

KCI has been a major issue in Kansas City with political and business leaders wanting to rebuild the three-terminal airport into a single-terminal at a cost of about $1 billion. But according to polls, residents prefer KCI the way it is because of its convenience.

At a celebration last month for Southwest Airlines, Mayor Sly James made it clear he wants a new terminal built at KCI in the not-too-distant future, to carry the airport forward for the next 35 years. How to pay for that remains a burning questio

Even though local taxpayers wouldn’t fund the renovation, the effort toward improving KCI fell by the wayside last year.

Despite the stalemate, Kansas City officials considering their next steps say privatizing KCI isn’t in play.

Jolie Justus, a Kansas City councilwoman who chairs the city’s Airport Committee, said the city fields occasional pitches from the private sector about public-private partnerships to finance the renovation or reconstruction of KCI’s terminal.

Justus said financing the overhaul isn’t a foremost concern at this point. Airlines have pledged to guarantee debt on aviation bonds that the city would issue for KCI.

Proponents of privatizing public assets or entering into public-private partnerships are seizing on President Trump’s repeated comments about fixing public infrastructure in the United States, especially airports, in part by using private investment.

Trump has likened U.S. airports to those found in “third world countries” and his proposed federal budget includes privatizing the air-traffic control operations.

Ohio businessman Dan Slane developed a list of top infrastructure projects for Trump’s transition team. A draft copy of that list obtained by The Star and the McClatchy D.C. bureau included KCI.

Norman Anderson, CEO of CG/LA Infrastructure, a consulting firm that advised the Trump transition team on infrastructure priorities, said he knew of investors who were interested in KCI, but he wouldn’t disclose which ones.

“I know lots of private companies have asked us if we could help them get it,” Anderson said after an infrastructure forum in Montreal last week. “Because it’s one of let’s say 10 airports that would be sort of the first ones to be privatized or you could just do a long-term lease.”

Slane, speaking at the Montreal infrastructure forum, said the total bill for U.S. infrastructure is about $2.5 trillion, adding that “you can’t get there without private financing.”

“So the problem with airports is that they are, for the most part, locally owned,” Slane said. “...There is a severe bias among local authorities from allowing that (privatization) to happen and the airlines are opposed to it.”

Europe has long warmed to private ownership of airports. According to Airports Council International, a trade group of airport operators, 79 airports in Europe have full private ownership while 126 are combinations of private and public shareholders.

Flirtations with private airports in the United States are far more limited.

The only true privately run commercial airport is Branson Airport in southwest Missouri, which opened in 2009. It’s been a financial failure. Just two years after opening, the airport defaulted on tax-exempt, unrated bonds and has sought forbearance from bondholders. It loses money every month; in January, it posted a $139,742 loss, according to a monthly report to bond trustees.

The Federal Aviation Administration has a program that helps public airports tap private resources for improvements and development. The Airport Privatization Pilot Program, which started in 1996 as part of the FAA Reauthorization Act, has drawn limited interest.

The last airport to apply through the program was the Westchester County Airport, a small air carrier in West Plains, N.Y., in 2016. The Hendry County Airglades Airport in Clewiston, Fla., awaits a final application from its sponsor. The Luis Munoz Marin International Airport in Puerto Rico was approved in 2013 for a 40-year operating lease agreement with Aerostar Airport Holdings.

The largest airport to apply for privatization through the FAA was Chicago Midway Airport in 2009. Chicago’s second-largest airport drew a bidder offering to pay $2.5 billion to run it on a 99-year lease.

Chicago leaders eventually abandoned the idea. While Midway’s application for privatization was being evaluated, the city had disastrous experiences with selling off other public assets. Most infamous was the lease of 36,000 parking meters to private banks for 75 years in 2008 for $1.157 billion.

A report by the Chicago inspector general found that Chicago would have made nearly $1 billion more over the 75-year term of the parking meter lease had it held on to the asset. The report added that city leaders, lured by the one-time windfall from the deal, failed to consider alternatives.

The Midway privatization effort of 2009 coincided with the last serious discussion Kansas City had about selling KCI.

At that time, the city was grappling with substantial budget shortfalls amid a national recession.

Then-Mayor Mark Funkhouser, who broached the idea of selling KCI in a 1999 audit report while he was city auditor, said at the time that privatizing KCI could raise $1 billion, which could be used for other city purposes.

Selling KCI, however, may not lead to that much of a financial windfall. For one thing, the city would have to repay outstanding debt. KCI now has $209 million in outstanding debt, which would be subtracted from any sale price.

Then there would be a complicated process to study the city’s equity in KCI compared to what the federal government has invested there, and the money would be divided proportionally, further hacking away at the city’s proceeds.

Mark VanLoh, who was the director of the city’s aviation department under Funkhouser, said at the time he saw few downsides to a sale, other that a perception from residents that they were losing their airport.

VanLoh said that given the amount of federal regulations on airports, cities actually have little say in the operations of their airports.

“Well, you don’t have control,” he said in 2009. “And you never did anyway.”

City leaders did identify one problem with privatizing the airport: A buzz saw of opposition from union employees at KCI.

The airport employs about 300 to 350 employees who are members of Kansas City’s municipal blue-collar workers’ union. The union represents everyone from bus drivers to maintenance and custodial workers.

Pat Klein, Kansas City’s current aviation director, recalled a push to privatize the airport’s bus operation to save $7 million over five years through efficiencies.

But the bus drivers protested strenuously, saying it would reduce their wages and benefits or even lead to job losses. The City Council flatly rejected the plan in 2013.

Bill Skaggs, Kansas City’s Mayor Pro Tem in 2009, still thinks privatizing KCI is an idea worth exploring. He believes a revamp of KCI could be accomplished faster that way.

“I think the upside if we privatize it is it would be done a lot quicker,” Skaggs said. “The downside is I’m concerned about what would happen to the employees.”

Regional leaders have discussed ways to operate KCI that fall short of privatization. Steve Klika, chairman of the Kansas City Area Transportation Authority, has talked to city leaders about the the idea of taking control of KCI.

KCATA is a bi-state political entity formed by Congress and authorized by Kansas and Missouri in 1965. The KCATA can issue bonds and theoretically finance a revamp to KCI without a public vote.

Klika is among many officials growing impatient with the lack of progress on KCI. The stalled KCI discussions opened an opportunity for Kansas, where Gov. Sam Brownback confirmed last month he’s exploring building a rival to KCI in Johnson County.

“I can tell you I have offered it as chairman of the ATA,” Klika told The Star last month. “I’ve offered it as an alternative for the city to consider to move this damn thing along. Nothing formal has come of it. I think they’re still circling the wagons up there figuring out what to do.”

City officials say that even if the KCATA were to take over KCI, they would still insist on a public vote for major improvements.

The Port Authority of Kansas City, or Port KC, has been mentioned as a partner in managing all or a part of KCI.

“Port KC wants to help the city and KCI succeed and would be happy to help play an appropriate role in ensuring that success,” the Port Authority said in a statement last month.

“Mayor James and the City Council are committed to letting Kansas Citians have their say on the future of KCI through a public vote. Port KC believes a public vote on the airport must happen as well.”

Lindsay Wise of The Star’s Washington bureau contributed.

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