Despite the lurching, neck-snapping ride Mayor Sly James has put Kansas City residents and fellow City Council members through on his drive for a single-terminal airport, real progress is now starting to be made.
A clearer direction is coming into focus because at least one key council member is moving decisively to take the reins away from James, whose impatience and secretiveness set the airport proposal careening down pit road.
Yes, the city is still fooling around with the Burns & McDonnell, private-finance, private-build proposal, which James hatched last month. And, yes, the city is going to accept other private proposals and will give interested companies at least a few additional weeks to assemble their proposals.
That’s all well and good. The best news, however, is that Councilwoman Katheryn Shields has introduced an ordinance that would do the project the right way: It would put the city back in the driver’s seat.
Katheryn Shields
The ordinance, which she introduced at last Thursday’s council meeting would authorize a Nov. 7 election on a proposal for the city to issue up to $990 million in airport revenue bonds. It also provide for “a competitive bidding process for any construction.”
Now, we can argue about the timing of an election — it might be best to carry it over to next spring — but I cannot overestimate the importance of the two main elements of Shields’ ordinance.
James threw this whole process into reverse when he played the Burns and Mac card. It threw not only the public for a loop but a majority of the other council members. It took a while for them to collect themselves and realize that all the mayor had really done was launched an unguided missile.
Shields, who’s got more elective experience than any other council member, has contended all along that the city could do the job cheaper because it would get a significantly lower interest rate on bonds it issued than bonds, or loans, issued or arranged by private interests. Burns and Mac acknowledges that point but says it can make up the difference by building the terminal in four years instead of the six that the city has projected.
I say balderdash. Maybe Burns and Mac could do it faster, maybe not. Who knows what’s going to happen? When the Truman Sports Complex was being built in the early 1970s, a building and construction trades strike delayed construction for months. That could happen again. Anything could happen. All in all, it’s hard for me to see how a private deal can beat a public deal involving probably at least a hundred million dollars less in interest payments.
The two main objections to having the city in the driver’s seat are: 1) some people, maybe many, worry that there wouldn’t be enough revenue to pay off the bonds, leaving the city on the hook, and 2) a lot of people just don’t trust the city to properly monitor a project this big.
To the first point, there’s going to be plenty of revenue. It’s going to come primarily from the airlines — in the form of landing fees and gate rentals — and parking and concession fees. Does anyone really think fewer people are going to use a new, more appealing airport? Does anyone really think fewer planes are going to be coming into and going out of Kansas City? Ridiculous. It’s going to grow and grow fast. The Kansas City area is experiencing breathtaking growth and expansion, and people are not going to decide they want to drive from here to California, even if gas prices stay at $2.20 for the next five years.
To the second point, no one expects the Aviation Department, as presently constituted and staffed, to oversee all aspects of the construction of a new, billion-dollar airport. But just as the City Council hired two law firms to help it sort through the various contractual approaches being considered, it could hire a team of full-time airport consultants and advisers to oversee construction. I’m sure there are any number of experts who would be thrilled to move here for five or six years and get paid handsomely to make sure the job is done right.
Finally, the last and best reason to keep this a publicly controlled lies at the basic distinction between public and private.
Private companies, while they generally strive to produce good products and do quality work, are motivated by one overarching goal: to make money. There would be ample motivation for Burns and Mac, or another company, to do right by the city and Kansas City area residents. However, as we have seen time and time again — i.e., Volkswagen cheating on emissions and General Motors covering up faulty, life-taking ignition switches — profit reigns above all else, in the end.
On the other hand, government — whether you like it or not — is not out to make a profit. No matter how good the new terminal ends up being, the aviation director is not going to be in a position to dole out tens or hundreds of thousands of dollars in bonuses to the troops. Government’s overarching mission, at every level, is to look out for the public welfare and public safety, provide good services and facilities, and improve the quality of life for all citizens.
Call me Polyanna, call me a hopeless Democrat, but plant me 100 percent behind Katheryn Shields’ proposal: Trust municipal government to get this done at the best price and with a minimum of hanky panky. If Burns and Mac wants to do the job for the city and comes in with the “lowest and best bid,” that’s fine.
What we should not do is entrust a billion-dollar airport job to a private company — lock, stock and barrel — and then close our eyes, cross our fingers and hope the company doesn’t screw us before it’s all over.
JimmyCsays: At the juncture of journalism and daily life in KC 
100% agree. Please read this article from last week’s New York Times about private funding and that it turns out not to be the nirvana of infrastructure building in terms of cost/benefits:
Public-Private Projects Where the Public Pays and Pays
Key paragraphs from the article:
“And whatever the advantages of giving the private sector a stake in public works — rather than leaving the government in control — experts agree that while some public-private partnerships may result in near-term savings, there is little hard evidence that they perform better over time.
“There is a significant misunderstanding of the way public-private partnerships actually work,” said David Besanko, a professor at the Kellogg School of Management at Northwestern University. “Taxpayers or users are going to need to pay for private infrastructure just as they need to pay for public infrastructure. You’re going to need to get revenues from somewhere.”
Whether through fees like parking meters and tolls on a road, or through government payments to the contractors, such projects are ultimately supported by taxpayers.
Mildred Warner, a professor at Cornell University, pointed out that private firms and local governments can have fundamentally different interests.
The government has broad concerns, like improving overall regional transportation, reducing traffic and curbing pollution.
The companies have a narrower concern — maximizing financial returns.
“Is there a reason for there to be public control,” she asked. “Is there a public good?”
Aaron Renn, a senior fellow with the Manhattan Institute who has studied a number of public-private partnerships, said one problem with them is that the public officials negotiating these arrangements sometimes lack the financial sophistication and advice to fully understand the deals.”
Considering all the NY Times articles the Star reprints, this one would seem rather timely for the in-depth section.
I read that story, Bill…Very good. It reinforced my contention that the city should not hand this project off to the private sector. Way too risky. The city is fully capable of overseeing the project — as long as it hires good, knowledgeable people to be in charge of oversight.
Adding on to your first point, Revenue Bonds are not necessarily going to be backstopped by any kind of guarantee from the City. Now depending on the specifics of the deal, if investors are concerned about the revenue stream, the underwriters could determine that a backstop from the City is needed to achieve the lowest interest rates in the market–or to even be palatable to investors at all. However, as you have stated, as long as the project says close to budget, there is no reason that there shouldn’t be ample revenue, with some cushion, to support the debt service.
Beyond that, there has been some indication that the airlines might be required to backstop the debt, maybe through a covenant to ensure that they set their airport fees so that revenues are sufficient to do so. In any case, there are definitely ways to insulate the City from any kind of financial liability, even if the City is the issuer of the bonds. I suspect many people are skeptical because of what happened with the P&L District, but that was a speculative commercial real estate development venture which absolutely required the City to stand behind it to make the financing possible. The airport is a very different and much more financially stable project.
That’s an excellent point on the distinction between the Power & Light district and a new airport. But I believe you’re right when you say the P&L experience might be at the root of a lot of people’s skepticism. It’s too bad that unfolded like it did, with the Great Recession coming along at just the wrong time, at least for that project.
Wouldn’t the public route add to the city’s negative bond rating? https://www.moodys.com/research/Moodys-Revises-Kansas-Citys-MO-Outlook-to-Negative-Aa2-GO–PR_903854129
Interesting question. One hopes the city leaders will devote sufficient technical expertise and time to address this point, as well as the many other complicated issues involved in a billion-dollar project. But, based on how things have gone so far, I’m not optimistic.