KCI developer Edgemoor cannot use $14 million in future revenues from the planned single terminal to help disadvantaged communities participate in construction of the project, the Federal Aviation Administration has ruled.
It will be up to the company to find another source of money to meet the obligation, city officials said Thursday.
The company planned to use future airport revenues to finance a $28.2 million benefits package for low-income workers and minority owned firms. It was a key provision in the memorandum of understanding approved by the City Council on an 8-to-5 vote Feb. 8.
FAA policy allows revenues to be used for community benefits only if it finds there is a clear financial benefit to the project. In a July 19 letter to city aviation director Patrick Klein, the agency gave at least conditional approval to several programs, including $3 million for worker transportation to and from the job site, $3 million for financial guidance and bonding support to minority and disadvantaged businesses, and $2.5 million for licensed child care.
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But the agency disallowed as “revenue diversions” other major benefits, such as an $8.9 million workforce training program for low-income workers, including former offenders; a $1 million contribution to the Shared Success Fund, a city initiative providing gap financing to attract developers; and $1.25 million to Love Thy Neighbor, a privately funded volunteer program to help senior citizens with home renovations.
The FAA also rejected the use of airport revenues for $1.5 million in assistance to the Northland, including housing, economic development and mental health needs.
Edgemoor managing director Geoffrey Stricker said in an interview Friday that the company will make good on the entire community benefits package, one way or the other.
“We’ve never wavered in our commitment to Kansas City,” Stricker said. He added that the firm is continuing to talk to the FAA about the disallowed programs and hopes “to provide the clarity and the comfort” the agency needs to permit the use of airport revenues. He said he expected to update the City Council on the matter within the next few weeks.
The company could pay for the programs from its own pockets or seek private equity. Stricker said it was premature to discuss the company’s options if the FAA did not reverse its decision.
The February memorandum of understanding calls for the city and Edgemoor to work cooperatively to identify other sources of money if the FAA disallows the use of airport revenues. If no alternatives can be found, the developer “shall be solely responsible for funding, or causing to be funded, such programs.”
City Manager Troy Schulte said Thursday that the city and the company might be able to restructure the workforce training program so that it is acceptable to the FAA. But otherwise, he said, the onus was on Edgemoor. “It’s in Edgemoor’s hands to figure out a solution,” Schulte said.
The issue will have to be resolved before the signing of final development agreement between the city and Edgemoor, scheduled for November. The new terminal, currently estimated to cost $1.4 billion, is projected to be completed and opened by October 2022. No taxpayer money will be used.
City Council members expressed frustration they weren’t aware of the FAA’s July 19 letter until this week.
“I have a concern that the council appears to be the last to know on very important issues with the future of this project,” said Councilman Quinton Lucas.
Councilwoman Alissia Canady said Edgemoor will have to come up with a plan to make the community benefits agreement whole.
“We’re in the process of working toward the development agreement and these are things that were non-negotiables, part of my consideration for voting for this project,” said Canady, who helped found Love They Neighbor. “So we’re going to give them an opportunity and see how they respond to it.”
Councilman Lee Barnes, who opposed the decision to award the project to Edgemoor because of doubts about its experience and financial wherewithal, said this raised new questions about the company’s capacity to execute the job.
“I just don’t think they have that kind of capital,” he said. “They have a tight fist.”