Why can’t Kansas City build an airport using its own financing?
It could. The city’s aviation department could choose to use airport revenue bonds, which don’t require taxpayer dollars and would be repaid by user fees. In fact, that was the city’s original plan, before the Burns & McDonnell idea surfaced. Airport revenue bonds require a public vote, which the city had always intended to have. Missouri law is somewhat unusual in that it requires a public vote for airport revenue bonds even though taxpayer dollars are not involved.
Airport revenue bonds likely would carry a lower interest rate than private financing, making the project potentially less expensive and lowering the debt load. But one argument for having a public-private partnership instead is that construction could be completed faster — and time is money.
Private financing also makes it crystal clear that taxpayer dollars are not involved and the city’s credit rating is not affected.
Will Burns & McDonnell own the airport afterward?
Burns & McDonnell would not own the airport. It would still be owned and operated by the city.
Who is on the hook if the project is completed and airport revenues aren’t enough to pay the debt and interest on the project’s cost?
The Burns & McDonnell proposal says the airlines would be responsible for the difference, and so far we’re told the airlines are okay with that. The risk would be stipulated in the lease agreements between the company and the airlines. If an airline goes out of business, the other airlines would be required to make up the difference, just as would happen with public financing.
How does Burns & McDonnell make money on the deal?
The company would design and build the airport for one lump sum — an estimated $1 billion. It would earn a fee for doing the project, but it’s not yet clear how much. The company hopes to make a profit, but again, the anticipated rate of return on its investment is not yet clear. Because it assumes the risk for cost overruns, Burns & McDonnell will have an incentive to bring the project in on budget.
“No one is guaranteeing us anything on this project. No guarantee on how much it’s going to cost — we’re guaranteeing it,” CEO Ray Kowalik said. “So we’ll have budgets together and we’ll hopefully have some profit.”
How do we know Burns & McDonnell won't build something on the cheap?
The company says it is based in Kansas City and its reputation is on the line, so it would not want to build anything substandard. Plus, the airlines are not going to accept something cheap that will increase their maintenance and operations costs. “They’re not going to let us do that,” said Dave Frantze, a Kansas City development attorney working with Burns & McDonnell on this deal. “They’re going to require it be a quality project.”
What if the voters say no?
Kansas City could regroup and try a new proposal for the airport, as Jackson County did after voters rejected a bi-state proposal in 2004 for the Truman Sports Complex. But it would prolong the planning and costs would almost certainly go higher. Construction costs have been rising 6 percent to 8 percent every year for the past few years.
Would a single terminal still be convenient?
The company says it wants to keep the new single terminal convenient. The new design could allow for more amenities, would have covered curbside drop-off and pick-up, moving walkways and more restrooms and eating options after going through security. CEO Kowalik pledges it will not have excessive walking distances, but the design is not yet complete.
What is the effect on ticket and parking prices?
So far, supporters estimate ticket price increases might go up by $5, but that could change at the discretion of the airlines. Ticket prices are more affected by the cost of fuel, personnel and market demand than by construction.
The city would retain control of parking operations, which currently generate more than 40 percent of airport revenues. It’s likely parking fees would also go up somewhat over time, just as they have already increased in recent years. The city says it would be counterproductive to raise parking prices too high, because that would just diminish the parking business.
Will there be more direct flights?
Airlines have not made any guarantees about more direct flights out of Kansas City.
“What they have said is we don’t currently connect many of our flights through Kansas City because it is inconvenient to do that,” said Burns & McDonnell’s counsel Frantze. “People have to go outside of security and back in if they’re connecting.”
If these inconveniences are removed, the airlines might be more interested in connecting more flights here.