November 14 was Mayor Lyda Krewson’s birthday.
And her birthday gift from U.S. Rep. Wm. Lacy Clay was not to her liking. It actually made her livid, according to inside sources. At the STL Not For Sale Town Hall on Airport Privatization held on her birthday, Clay’s representative Steven Engelhardt got up and read Clay’s words.
“I am today demanding that the St. Louis Board of Aldermen and the Board of Estimate and Apportionment authorize a binding public vote on any future recommendation to privatize St. Louis-Lambert International Airport,” Engelhardt read.
“While I remain skeptical of any net community benefit that might result from such an agreement, I am deeply troubled by the lack of transparency and the obvious conflicts of interest that have tainted the current airport study process, including the involvement of individuals who retain a direct financial interest in its outcome.”
Clay joined St. Louis Comptroller Darlene Green and 20th Ward Alderwoman Cara Spencer, among other legislators, in calling for a public vote.
Engelhardt’s announcement set the scene for an intense look at the privatization process through the perspectives of four panelists. The panelists included Ray Mundy, former director of the University of Missouri-St. Louis’ Center for Transportation Studies, who said he was open to the idea of privatization. Tony Messenger, metro columnist for the St. Louis Post-Dispatch, spoke about his experience covering the privatization process over the past couple years. Tyson Pruitt, the comptroller’s spokesman, filled in some blanks about financial aspects, and Spencer spoke about her attempts to get legislation for a public vote passed at the Board of Aldermen.
In response to Clay’s announcement, Krewson’s spokesman said, “The mayor has talked about this with Congressman Clay and she remains unopposed to a public vote, as she’s said publicly many, many times. There’s just nothing currently to vote on.”
Mundy started the discussion off by saying that in his 40 to 50 years of doing research on airports he has never heard of “success fees.” This how the City of St. Louis will pay its consultants on the airport deal. If the city privatizes, then the consultants will be paid “success fees.”
“Any fruit that could come from the process being used would be fruit from a poisoned tree,” Mundy said. “The process has been very well poisoned. I’ve never seen a process where we signed a blank check for the people to do the work and say, ‘We’ll do accounting after it’s all done and you’re successful.’”
Messenger agreed. The team that is acting as the city’s consultant is led by Grow Missouri, Inc., an organization funded by retired conservative financier Rex Sinquefield, a billionaire who has invested heavily in St. Louis and Missouri politics and governance issues. Grow Missouri paid for the application into the Federal Aviation Administration’s Airport Privatization Program — and it created the metrics for the city to select a consultant.
“I can’t imagine a more poisonous public contracting situation in which one organization was under contract to design a process that then led it to receive the bid — while they were still under contract,” Messenger said.
There were several other respected folks who applied to be the city’s consultant on the deal, Messenger said.
Messenger said, “Nearly every single bid said this: ‘Don’t do it the way you’re contemplating doing it. Don’t have a success fee. It’s a massive conflict of interest. It creates an incentive to privatize, not to give the city good advice which may lead to privatization.’”
Taxpayers on the hook
Spencer explained that outside of Puerto Rico, only one out of the country’s more than 450 airports has been fully privatized: Stewart International Airport in Newburgh, NY. After Newburgh privatized its airport, the biggest carrier, Delta Airlines, skipped town, she said, because pricing was too dynamic — which public ownership highly restricts, she said. The private operator left after seven years.
“The public had to take it back over,” Spencer said. “Do you know what it cost the taxpayers? It cost $78 million to take back the ownership of that airport. That would devastate the City of St. Louis. We don’t have $78 million sitting in the bank.”
Denver privatized just one terminal, and it was a disaster, she said.
“It has mounted those taxpayers $200 million to take back ownership after that debacle,” Spencer said. “So I’ve got a financial stake in this because I’m a city taxpayer. If this deal goes awry, I’m on the hook. And I want to make sure what happens with our airport is in the best interest of our taxpayers.”
St. Louis became the first municipally owned airport in the United States in 1927. Because of that, St. Louis is among only 12 public airports out of 457 throughout the country that is “grandfathered” into a federal program that allows the owners to receive part of the airport’s revenue. The city receives about $6.5 million annually – but that would go away if the airport is privatized.
Spencer explained that city taxpayers have paid zero dollars since 1956, and the airport is funded entirely by user fees and federal grants. That would also change.
What about the debt?
As part of this process, supporters of privatization pointed to the airport’s $590 million in debt. However, Spencer said that the city is scheduled to pay all of that debt off in the next five to seven years. After that point, the airport can invest in developing the undeveloped land surrounding Lambert. But if the city privatizes, then that opportunity goes out the window, she said.
Mundy agreed with Spencer that the airport’s financial path is good, and it’s under good management.
For comparison Pruitt provided the numbers for other airports’ debt: Dallas has $2 billion, Miami $5 billion and Cleveland $634 million.
What are the consultants doing?
In his reporting, Messenger has had trouble finding out the what the consultants are doing because of the contract itself. While the public can see a list of payments, they cannot find out what the lawyers or consultants did to earn those dollars.
“There is no accounting,” Messenger said. “I found that problematic.”
The Airport Working Group — which consists of representatives from the mayor, comptroller, Board of Aldermen and the president of the Board of Aldermen — issued a Request for Qualifications (RFQ). This is basically the city reviewing the resumes — not proposals — for people interested in privatizing the airport, Messenger said. The public is only allowed to see limited information about the 18 teams that responded to the RFQ.
Paul Payne, who is leading the working group, told The American recently that they interviewed these 18 companies over the last week and will share some findings at the group’s December 5 meeting. The next step after that will be to issue a Request for Proposals and basically invite those who they feel meet the qualifications to submit proposals.
Leasing the airport would require a city ordinance, approved by the Board of Aldermen and the Board of Estimate and Apportionment.
Messenger pointed out that the original application to the Federal Aviation Administration’s included a public vote being an important part of the process. Yet, that has changed under Krewson’s leadership, he said.
Linda Martinez, the mayor’s appointee to the working group considering privatization, recently addressed the question on St. Louis on the Air.
“If you read very carefully, the proposal was to submit to the people a charter amendment that would delegate solely to the mayor the opportunity to make a decision,” Martinez said on St. Louis Public Radio. “This mayor said, ‘I don’t want to use that approach.’”
Instead, the mayor chose to pursue the option giving a vote to the Board of Aldermen and the Board of Estimate and Apportionment. The FAA and the airlines operating out of Lambert will also vote on any potential proposal.
Mundy said that he anticipates the public will soon start hearing big numbers. In the proposals and campaign to privatize, citizens will hear that millions will go towards public education and other causes, Mundy said. Messenger agreed.
“It changes the dynamic of the discussion,” Messenger said. “When those numbers are thrown out, will we as citizens be able to trust the analysis of them? Will they be real numbers or Monopoly numbers?”