After months of hangups and delay, the final pieces of the deal to build a new single terminal at Kansas City International Airport appear to be coming together.
Airport Committee members voted Thursday in favor of an ordinance approving agreements with the developer Edgemoor Infrastructure and Real Estate and a yet-to-be-signed term sheet that sets out the airlines commitment to a $1.5 billion budget for the project.
Councilwoman Jolie Justus, who chairs the committee, said the airlines are expected to sign that term sheet by Wednesday and the full council could vote on the ordinance the following day. The term sheet is a precursor to a more detailed use and lease agreement — expected to be completed March 11 — that governs fees and operational costs airlines will pay to use KCI and finance the new terminal.
“It has been a long road, but we’re excited,” said Geoff Stricker, managing director for Edgemoor. “I think we see the light at the end of the tunnel now.”
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But a plan to finance early costs of the project is still a week away, and some council members contend the venture is moving forward with the city at financial risk. Voters were assured before they approved the terminal plan in November 2017 that the airlines would be on the hook for the project.
Still at issue is $90 million in early costs, including $23 million in fees for Edgemoor and its contractors. Those funds would also allow crews to start work on the site as soon as the city approves the deal, instead of waiting for bond proceeds, which will finance the bulk of the project.
Justus said she was told Thursday morning the city’s finance department could pursue an alternative to short-term borrowing to finance those initial costs. The committee is expected to find out more information about that plan next week. She noted concerns council members have raised about borrowing from within the city’s coffers.
“So we want to make sure that we are doing the best interest of the council and the public, and so eliminating the short-term borrowing would be, I think, a better step forward,” Justus said.
A newly agreed to provision of the term sheet would require the airlines that serve KCI to cover the costs of that potential short-term financing in the event the project goes sideways and bonds are never issued. The bonds are expected to be retired through fees paid by airlines that use KCI.
That would protect the city in what deputy aviation director Dave Long called a “doomsday scenario.”
“What this agreement says is that the airlines have agreed to pay the short-term debt...in the unlikely event that we somehow do not go forward and secure the long-term debt,” he said.
Council members also learned late Thursday morning that the Federal Aviation Administration had signed off on an environmental assessment required before work on the site can begin.
With the environmental approval nearly secured, Stricker said Edgemoor could start work as soon as the city signs off on the deal.
“We’ve bid out some of that work already and have subcontractors ready to go,” Stricker said, “so the minute the council agrees to sign our contract we can turn around and sign subcontracts and get people started to work immediately.”
Still, there is hesitancy among some council members.
Councilwoman Teresa Loar, 2nd District at-large, said she wasn’t confident that the term sheet adequately bound the airlines to pay the debt service, though the Long and Galen Beaufort, an attorney for the city, said it did.
“We have no signed agreement. They brought us a term sheet with no signatures on it,” said Loar, the lone dissenting vote Thursday, “and even if it had signatures on it, there was nothing in there that obligated these signatories to pay the $1.5 billion, which is where the $90 million is included in.”
Loar said she was under the impression the term sheet and use and lease agreement would come before the council at the same time and that she would not vote to obligate the city to anything until there is a use and lease agreement.
“This is a worksheet,” Loar said. “I do not feel it obligates the airlines to pay.”
At the same time, Councilman Scott Wagner, 1st District at-large, said he was frustrated that the short-term financing discussion had been put off, calling the vote “extremely premature.” He has proposed a financing plan that uses private equity.
“It seems to me that if you’re going to say that you’ve got a new financial plan, wouldn’t you actually want it in the ordinance that you’re about to pass?” Wagner said.
Neither Loar nor Wagner was comforted by the airlines’ pledge to cover that $90 million of short-term debt.
Wagner didn’t see it as a blank check, noting the airlines base their prices on what it takes to run airports all over the country.
“Let’s say the long-term agreement blows up and now you have this short-term agreement, we are basically saying we’re going to put that on, and that risk on the flying public and the users of our airport,” Wagner said.
Loar said the city was supposed to have an airport deal two years ago for less than $1 billion.
“It just goes on and on and on and on with the lies we’ve been told,” Loar said.