The increasing size of a new terminal building at Kansas City International Airport, coupled with financing costs and the prospect for fewer federal grants, is pushing the total cost for the project near $2 billion.
That would be roughly double the original estimates of the project cost, and far bigger than estimates given to Kansas City voters when they approved the new terminal in an election almost a year ago.
But a caveat: The latest overall figure of $1.923 billion includes $401 million in finance costs. It would be like buying a house and considering the total cost of rolling closing costs and bank fees mortgage is paid off instead of the sale price.
Do homebuyers usually tell their neighbors the price they agreed on to buy a house, finance costs included in a mortgage?
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Most people will say the agreed upon price. Take the financing charges out of the figure, as well as new estimates about the fewer number of federal grants that Kansas City officials expect to fetch for the project, and the cost is about $1.634 billion.
That’s still quite a bit higher than earlier estimates for the project. So what gives?
Geoffrey Stricker, managing partner for KCI terminal developer Edgemoor, says airline requests for four additional gates, as well as more parking for airplanes and larger gate holding areas have driven increases in project costs since its original projection.
“The building got 40 percent larger,” Stricker said. “Dollars follow square footage.”
Financing charges also increase the more the project increases. Original estimates on financing costs, back when the new terminal figured to cost about $1 billion, were $289 million.
The airlines that use KCI, not taxpayers, pay for the terminal project. Are airlines getting worried about the new costs?
Dan Landson, a spokesman for KCI’s largest user, Southwest Airlines, would not directly address the question of whether airlines are resisting the growing price tag for KCI.
“We don’t have much to add other than the airlines and KCI have been meeting regularly,” Landson said. “We continue to work collaboratively on the project and remain engaged on the progress.”
Stricker thinks the airlines are on board.
Given that airlines pay for the project, then will they pass along cost increases to customers through higher ticket fares? Or will the Kansas City Aviation Department hike airport costs that it controls, like parking fares and concession prices?
Justin Meyer, deputy aviation director, doesn’t think so. He said, by way of example, that a fare for a ticket to fly from Kansas City to Chicago goes to help pay for a new terminal project underway at LaGuardia Airport in New York City.
Meyer said airlines can absorb costs of terminal projects within their networks.
“We’re paying for projects all over the country,” Meyer said.
Even so, the growing KCI cost could become a political problem for Edgemoor as some Kansas City Council members are getting restless about the news of the terminal’s price.
Scott Wagner, mayor pro tem of Kansas City, said he’s “not pushing the panic button” yet, but did voice some concern about the degree to which the project has increased in cost in recent months.
“It is concerning that we have had the escalation that we have had so quickly before we even tear the place down,” Wagner told The Star. “At the end of the day, how and in what way the airlines respond to the financing package they are responsible for is going to be very important in whether we should hit the panic button or not.”
The Kansas City Council was supposed to hear from the airlines at Thursday’s business session, but the airlines have rescheduled, to potentially two weeks from now. So instead, the council will hear from Edgemoor and top aviation department officials.
“At some point, the airlines are going to have to say either this is acceptable and this is how we intend to finance this,” Wagner said. “or they are going to say, ‘Hey, this is too much and then we have got a problem.’ I don’t know right now where they are going to be at.”