(January 3, 2009) -- Following-up on a story first moved yesterday Jan. 2 by LBReport.com regarding a Jan. 6 "closed session" of the City Council -- that City Manager Pat West says could be open but can be closed -- seeking authority to negotiate with various Wall Street firms terms of possible "acquisition" or "lease" of LB Airport, LBReport.com provides below details of an FAA "Airport Privatization Pilot Program."
On its website, FAA says:
Congress established the FAA's Airport Privatization Pilot Program to explore privatization as a means of generating access to various sources of private capital for airport improvement and development. Private companies may own, manage, lease and develop public airports.
The Act authorized the FAA to permit up to five public airport sponsors to sell or lease an airport and to exempt the sponsor from certain federal requirements that could otherwise make privatization impractical. The airport owner or lease holder would be exempt from repayment of federal grants, return of property acquired with federal assistance, and the use of proceeds from the airport's sale or lease to be used exclusively for airport purposes. The pilot program began in September 1997.
On September 14, 2006, the City of Chicago submitted a preliminary application for Chicago Midway International Airport, a large hub airport. The pilot program can only include one large hub airport, so applications for other large hub airports will be placed on a standby list.
Four positions remain available for non-large hub and general aviation airports...
Applications
| Airport Name | Airport Location | Application Status |
|---|
| Brown Field Municipal Airport | San Diego, CA | Application withdrawn 2001 |
| Chicago Midway International Airport | Chicago, IL | Preliminary application submitted September 2006 |
| New Orleans Lakefront Airport | New Orleans, LA | Application terminated 2008 |
| Niagara Falls International Airport | Niagara Falls, NY | Application withdrawn 2001 |
| Rafael Hernández Airport | Aguidilla, PR | Application withdrawn 2001 |
| Stewart International Airport | Newburgh, NY | No Longer in Program |
In an August 2004 report to Congress on the status of the Airport Privatization Program, the FAA stated in pertinent part:
Executive Summary
...In enacting the pilot program, it was the intent of Congress to determine if new investment
and capital from the private sector can be attracted through innovative financial
arrangements. Section [49 USC] 47134 permits the Federal Aviation Administration (FAA) to
exempt program parkipants from certain laws and regulations to encourage and permit
new investment and capital from the private sector. Section 47134 also requires 65 percent
of the total number of air carriers serving the airport and their associated landed weight of
the air carrier aircraft serving the airport to approve the dollar amount of the lease payment
or sale price.
In September 1997, the FAA issued application procedures for participation in the pilot
program. Consistent with the statute, the application procedures limit participation in the
program to not more than five airports. Only one large hub commercial service airport
may participate in the pilot program and the airport may only be leased. Only general
aviation airports can be sold under the program.
While there is a broad spectrum of private-sector development and services at airports,
there has been relatively little interest in the pilot program. Only five airports have
applied for participation in the program; no large hub airports have submitted an
application. Of the five applications received, one airport application was approved and
one airport application is currently under review. Two airports withdrew their
applications prior to completing the application process, and one airport's application was
withdrawn after FAA commented on the feasibility of the proposal. All the applications
submitted to date have been for leasing airports; no application has proposed the sale of
an airport to a private entity.
Several common elements to the five airports that submitted applications were:
1 ) management of the airport was not the owner's primary responsibility; 2) all airport
facilities were underutilized airports with either limited or sporadic commercial service
and serving a general aviation clientele; 3) transferring the airport from public to private
ownership is time consuming; 4) all airports were operating at a financial loss and
receiving some form of subsidy from their parent agencies; 5) the private operators
proposed to use a limited liability corporation to manage the airport; and 6) a strong
political commitment was needed to successfully transfer the airport to private control.
We believe that airport owners proposed privatization as a means to generate
development capital rather than use available tax-exempt financing. It is possible that, in
these cases, the airport's continuing operating losses may have impaired its access to low
cost financing.
All of the five applications submitted to the FAA for participation in the pilot program
proposed the use of new sources of capital for airport development. Additionally,
privatization proposals, as permitted by the statute, did rely on continued Federal financial
assistance. All five applicants offered to make an investment of equity capita1 in the
development of the airport during the initial five-year Capital Improvement Plan (CIP) with
a continuing commitment in later years. The level of investment varied by facility and was
often in the form of corporate funds to leverage Federal financial assistance. However, due
to the approval of only one application under the pilot program to date and the downturn in
traffic resulting from the terrorist attacks of September 11, 2001, we believe it is too early
to conclude whether the privatization of airports in the United States under the pilot
program can result in access to new sources of capital for airport development and
improvements in customer service...
The prospect of using the FAA program was first reported by Paul Eakins in the Press-Telegram today (Jan. 3) but details of exactly what management wants Council authority to do remain behind closed doors. The item as publicly agendized states:
Mayor and Council adjourn to closed session in the Council Lounge.
Pursuant to Section 54956.8 of the California Government Code regarding a conference with the City's real property negotiator:
Property: 4100 Donald Douglas Drive (Long Beach Municipal Airport) Long Beach, CA
City's Negotiator: Patrick H. West, City Manager
Negotiating Parties: City of Long Beach and Barclays Capital; Citi Group; Goldman Sachs; JP Morgan;
Merrill Lynch; Morgan Stanley; Fieldman Rolapp; Gardner Underwood; and Public Financial Management
Under Negotiation: Terms of Lease or Acquisition
Following up on an inquiry by LBReport.com, City Manager West described some background to the item in very general terms which we reported. For our coverage, click here.
Councilwoman Gerrie Schipske has publicly called for the discussion to be public and written critically of the process. For LBReport.com's coverage, click here.
LBReport.com brought the issue to public attention with an editorial urging opening-up the [now acknowledged non-mandatory] closed session and disclosure of what's proposed. For our editorial, click here.
Long standing Council declared policy has been to protect and defend -- and not to take actions that could unintentionally jeopardize -- local control of LB Airport.
Developing.
