Wednesday, February 21, 2007

Austin mayor seeks windfall in selling airport

Austin ponders putting airport in private hands

Some council members say public should vote on leasing Austin-Bergstrom.

February 21, 2007

By Ben Wear , Kate Alexander
Austin American Statesman
Copyright 2007

City of Austin officials are considering leasing out the city's eight-year-old airport, a transaction that could bring a windfall of several hundred million dollars but would also put control of a key city service in private hands.

City Manager Toby Futrell has been sounding out council members in one-on-one meetings and has suggested that the council be briefed as a group in executive session in the coming weeks.

Such an arrangement, even if a council majority goes for it, would face myriad legal and political hurdles and would probably not occur anytime soon. And it's unclear how a private lease might affect ticket prices, parking fees, the future of the about 320 city airport employees or other airport services.

Mayor Will Wynn, at least, is convinced that the city should unload Austin-Bergstrom International Airport.

The airport's revenue was $9.6 million above its expenses last fiscal year, city Aviation Director Jim Smith said, and the city has averaged $8.9 million in net income annually since 2001. But federal law prohibits the city from using that money outside the airport site, instead requiring that it be plowed back into airport improvements.

Governments nationwide have been entertaining offers for toll roads, state-run lotteries and airports from foreign investors awash in cash. Futrell said the city has received no airport lease proposal, verbally or in writing.

Wynn said he has been lobbying his council peers for several months on the subject, picking up on a move by Chicago Mayor Richard Daley to lease that city's Midway Airport.

"There's no financial reason whatsoever for the city to own the airport, as by law we can make not one penny from its operations or even property rentals," Wynn said Tuesday. "So why not explore a sale or a long-term lease that could net us hundreds of millions of dollars upfront that we could put toward any number of community needs, such as transportation?"

A sale is not an option, however.

Chicago and a handful of other cities have pursued putting airports in private hands under a 1996 federal pilot program allowing up to five U.S. airports to be leased. Chicago, which began the process at least a year ago, has applied to the Federal Aviation Administration but has not been approved yet, said Robert Poole, transportation studies director for the Reason Foundation, a libertarian think tank. Under that program, a city can't lease its airport to a private company unless the FAA and 65 percent of airlines using the airport agree.

Airlines in the U.S. generally have been leery about privatization, fearing increased costs and less sway over airport expansion.

One airport, Stewart International Airport, north of New York, went private in 1999 under that program. But Poole said the British company that leased the airport decided last year to put its long-term lease on the market. Ironically, the latest buyer was a government entity, the Port Authority of New York & New Jersey.

Overseas, airport privatization has become the rule rather than the exception in recent years. According to an analysis by Poole, most large United Kingdom airports have gone private, along with airports in Hamburg and Frankfurt, Germany; Rome; Naples, Italy; Sydney, Australia; and Brussels, Belgium. Paris airport authorities have sold off a minority stake in the city's two major airports.

The Rome airport went for about 2.7 billion Euros, or about $3.5 billion at today's exchange rate.

Smith, the aviation director, said customers around the globe have given mixed reviews to privately run airports.

"Some of these privatizations have been a success, where the airport has become better from the community's perspective," Smith said. "And there's an equal number of examples where it's gotten worse."

He noted that the highest- rated international airports — in Seoul, South Korea; Hong Kong; and Singapore — remain in government hands.

Council Member Sheryl Cole said the potential revenue from a lease makes the concept worth exploring.

But other council members have reservations.

Brewster McCracken said that although it might not be legally required, he believes that the public ought to weigh in on a potential airport lease.

"My sense is that we have to take this to the voters, as a practical matter," McCracken said, adding that voters approved issuing $400 million in long-term debt to build the airport in the first place. Smith said the city owes $370 million in revenue bonds on the airport, money that would have to be repaid even if the city leases the airport.

"Frankly, I don't view this as very likely, because there are a lot of things that have to happen," McCracken said.

Lee Leffingwell said he is skeptical about the idea but is willing to listen to any proposals.

"It is only a conversation worth having in my view because of all the money involved," Leffingwell said.

No one involved at this point has any idea what a private contractor would offer. A multidecade lease of Midway Airport, according to various published estimates, could fetch $2 billion to $3 billion. That airport had almost 19 million passengers board and land there last year; Austin-Bergstrom had 8.2 million.

But the city would have to sacrifice some, if not all, control over the operation of the airport, and Leffingwell said he would be averse to losing that control. Leffingwell, Cole and Council Member Mike Martinez agreed that voters should have a say in letting go of the airport.

The ideas abound on how Austin might use that potential windfall.

Street and drainage infrastructure seem to top the list for several council members. State Rep. Mike Krusee, a Williamson County Republican who has been heavily involved in Austin issues as House Transportation Committee chairman, has been talking to Austin officials about leasing the airport and suggests that the money could be used to build a passenger rail line to the airport.

But Martinez cautioned against getting too giddy about the notional bankroll.

"This is a not a perpetual funding source," Martinez said.

Martinez said he was concerned that if the airport were handed over to a private entity, current policies to promote Central Texas businesses and give the airport a local vibe with Austin-based restaurants and live music would be lost.

"I doubt you would see such a commitment and investment from a private investor," Martinez said.

Not necessarily, Wynn said.

"Obviously we could write into any deed restriction or long-term lease things like environmental controls, worker protections, even design features," he said. "So we could essentially still control elements of the look, feel or taste of that airport."

Some considerations for Austin

•Austin could get a large infusion of money that could be used for other city purposes. Currently, all airport revenue has to be used for the airport.

•Austin would probably have to give up at least some control over airport operations. The more control Austin retained, the less money the city could get.; 445-3698; 445-3618

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