Burns & McDonnell says its KCI proposal was wrongly disqualified
Burns & McDonnell escalated a campaign Monday to revive its failed proposal for a new KCI terminal, arguing that the city’s selection process has been plagued by irregularities and legal flaws.
The company, which mounted an elaborate public campaign this summer touting its Kansas City roots, was disqualified Sept. 6 by a city selection committee that recommended Maryland-based Edgemoor Infrastructure & Real Estate for the $1 billion project. The panel eliminated Burns & McDonnell after city attorneys advised that its proposal didn’t conform to municipal bond laws.
The City Council is scheduled to discuss and possibly vote Thursday on whether to negotiate a development agreement with Edgemoor.
Burns & McDonnell on Monday rolled out its legal and financial team to deliver a detailed and highly technical rebuttal to the selection of Edgemoor. The company called on the council to set aside the committee’s recommendation and consider its bid along with those of two other unsuccessful competitors, AECOM and Jones Lang LaSalle.
“It is never too late to correct a mistake. The City Council needs to correct this one,” vice president Ron Coker told reporters at the company’s Ward Parkway headquarters.
The dispute between Burns & McDonnell and the city extends deep into the weeds of laws governing government bonds and finance. It hinges on the company’s expectations of when and how it would receive revenues generated by the new airport terminal.
The cash that flows into an airport — from parking fees, concessions and airline payments — is like a waterfall that fills various buckets as it cascades down.
City attorneys say that under the master bond ordinance, the first bucket to be filled goes toward operating expenses. Further down is repayment of existing debt and then a bucket for the costs of airport maintenance. When all of those obligations are met, the city would use the remaining revenues to pay the company through annual appropriations.
Burns & McDonnell’s plan calls for the money coming from the airlines — ordinarily part of the waterfall — to be diverted directly to a trustee, which would then pay debt and return on equity for the firm’s investment in the new terminal.
The company and its financial partner, Americo Life, contend that this approach would cost less.
Kutak Rock, the city’s bond firm, said the airline payments must flow to the bottom of the waterfall in order to retire about $239 million in debt remaining from an airport renovation project completed 15 years ago.
Paying Burns & McDonnell’s private debt ahead of the older public debt could damage the city’s ability to borrow money in the future.
Burns & McDonnell and Americo disagree with this analysis. They produced an opinion by St. Louis law firm Thomson Coburn that says that money received from the airlines is not considered operational revenue and is not part of the waterfall.
All that aside, Burns & McDonnell’s team said Monday that it was open to negotiating the precise terms of financing.
Another attorney retained by the company, Charles Hatfield, said the selection committee was legally required to advance all four proposers to the council and rank them in order of their qualifications.
He said failure to do so invalidates the work of the committee, which included City Manager Troy Schulte, two council members and several city staff.
“There is no such thing in the city’s procurement law as a non-advanced proposal,” Hatfield said.
Charles Renner, the private attorney counseling the selection committee, said the committee ranked two firms — Edgemoor and AECOM, in order of their qualifications. It was under no obligation to include other proposers.
“Their logic is that all four of the submissions were to be ranked as qualified firms,” Renner said. “Taken to its extreme, if a fifth proposer was Mickey Mouse then he was due to have a ranking. Mickey may be a fine mouse but that doesn’t mean he would get a qualified ranking.”
Councilwoman Jolie Justus, a member of the selection team, said she understood Burns & McDonnell’s zeal to compete for the project.
“We would not be having this conversation were it not for Burns & McDonald,” Justus said, referring to the company’s initial proposal in the spring. “But I don’t know at this point that we have the kind of options they are looking for.”