I have not read any of the four proposals for a new Kansas City International Airport terminal and, frankly, don’t know if they have been made public yet.
All I know is what I read in The Kansas City Star and elsewhere — and what I hear from people who know more than I.
But my first impression, from reading in today’s paper about the proposals submitted yesterday, is that Burns & McDonnell’s first proposal — the one it submitted when it appeared poised to get a no-bid contract with the enthusiastic support of Mayor Sly James — would have resulted in the city and the airlines paying the firm hundreds of millions of dollars more than necessary for a new terminal.
We taxpayers can be very grateful that several City Council members, especially Councilwoman Katheryn Shields, pushed for a slowdown and insisted that other firms be permitted to submit proposals.
More about the possible cost saving in a minute, but first an observation on the politics….The deeper into this we get, the worse Sly James looks. Bow-tie man was so desperate to get a new airport started during his second term that he dumped the customary process — time tested by governments at all levels — of presenting a project, soliciting bids and determining the “lowest and best bid.”
Burns & McDonnell came to James (or vice versa, perhaps) with the unconventional idea of giving the firm a short-arm contract to build the terminal and do so with money the firm would borrow privately at a significantly higher interest rate than the Aviation Department could get by issuing municipal revenue bonds. The big plus — as pitched by Burns and Mac — was the city wouldn’t be on the hook if debt payments outstripped airport revenue. (The prospect of taxpayer dollars being on the line is a phony proposition on its face because the airlines, not taxpayers, would have to make up any shortfall. But that’s another story…)
Now, it’s all ass backwards, and there appears to be little chance of getting this project back on the conventional track, which offers the best chance of getting a new, vibrant, functional terminal at the lowest possible price.
Here’s where we are:
:: Instead of the city issuing a thorough “request for bids” outlining exactly what it wants and then being able to compare proposals side by side, line by line, four firms are throwing out hundreds of pages of proposals about wildly divergent plans, leaving City Council members to wade through the mess and attempt to figure out, or guess, which plan might yield a good airport and which would waste the least amount of money.
:: If pursued to conclusion, this loosey-goosey process will essentially place the contractor, not the city, in charge of the project, with citizens reliant on the goodwill and honesty of the “winning” contractor to give the city a good product at a good price.
Do you like that scenario? I don’t. Putting the contractor in the traditional role of “owner” leaves way too much to chance, not to mention significantly increasing potential fraud and waste.
The initial proposals, submitted yesterday, show exactly how vulnerable the city is with this tails-up approach.
…The original “memorandum of understanding” — put forth several weeks ago — between the city and Burns and Mac called for the airlines to pay “approximately” $85.2 million a year to repay the project financing. Now, the airlines are currently paying about $33 million a year to retire the city’s airport debt costs, so jacking it up by $50 million seems like an incredible hike.
Under the memorandum (now on the shelf), it was impossible to tell how much of that $85.2 million Burns and Mac intended to use for debt payments and how much it intended to retain as profit. That was all supposed to be worked out. But it sure sounded like Burns and Mac was going to have about $85.2 million a year to work with.
Yesterday, another firm that submitted a competing proposal, Los Angeles-based AECOM, homed in on that sky-high figure, saying it could build a $1 billion, 35-gate terminal for an annual payment of $69.8 million. Over 30 years, the firm said, the saving (the difference between $85.2 million and $69.8 million) would be $462 million.
Burns and Mac promptly responded by saying, essentially, “Oh, what we were talking about in the memorandum was the maximum annual debt payment commitment (the firm’s exact words), not the exact amount that would be needed year in and year out.”
Recognizing it was now in a bidding war, Burns and Mac went on to say its own annual financial commitment could be as low as $58 million.
…So, that’s what you get when you open up a big project to competition: One company exposes another’s numbers as outrageously high, and, almost miraculously, cost estimates drop precipitously.
That’s why the formal bid process, with the Aviation Department issuing revenue bonds and the city overseeing the project as “owner,” is the safest and surest way to go. The other approach doesn’t come close to guaranteeing the “lowest and best” bid.
But because of Sly James’ impatience and frustration at a lack of progress on the airport, we, the citizenry, have been stuffed into a box where we are totally dependent on pledges and cost estimates put forth by private firms. It’s a shitty position to be in…I hate it. And the best thing to do now — the way to put the city back in the role of card dealer and casino owner — is to call in all the cards, reshuffle, change the game and deal again.
Yes, starting over would be a pain in the ass, and it would mean putting off the election until next year. But it’s the right thing to do. Sly James has put the city in a big hole, and it’s time to stop digging.
JimmyCsays: At the juncture of journalism and daily life in KC 
It does look as if the Mayor’s personal ambition has confounded a sense of orderly process and faithfulness to the citizens. In addition to displaying the financing muddles, thanks for your point about comparing proposals (if not apples and oranges, at least Golden Delicious and Crabapples and maybe Fuji) — without a clear and methodically developed criteria for the kind of airport best suited to us by which to evaluate the proposals.
That’s the word I as looking for but couldn’t come up with, Vern — “criteria.”
First you develop the criteria — a terminal with how many gates, how many square feet of retail, etc. Then, you put the project out for bids, analyze the bids and finally award the job to the “lowest and best” bidder.
What you don’t do — what KCMO is doing — is say, “Hey, fellas, step forward and tell us what kind of airport you would like to build and about how much it would cost us.” That’s a prescription for the chaos and confusion we’ve got.
https://en.wikipedia.org/wiki/Laurie_Perry_Cookingham
Which brings up the question of exactly where is the City Manager in this bid process. I was not aware we changed the form of government in KCMO.
Troy Schulte is an excellent city manager. He’s got city government to the point where it is more responsive to the public than ever, by far. But this isn’t his call. The mayor and council set policy, and this is strictly a policy decision. Troy has no choice but to go along with council leadership. The fault at this point lies with three people: Sly James, Aviation Committee Chairwoman Jolie Justus and Mayor Pro Tem Scott Wagner. James got those two influential council members to line up behind his no-bid proposal. It can be undone, but it will take a strong push by several other council members.
This whole process is a rushed train wreck. The latest Business Week just had another story about public entities are hesitant to go the private financing route because of uncertainties and increasing the costs unnecessarily on their citizens.
And having a Johnson County resident (George Brett) pushing the Burns and Mac proposal in their ads is not a smart idea – more of the Joco telling KCMO how they should do business. They should give up on this rush to November or else it’s going to lose at the polls and it will be several years before anyone will want to tackle it again.
Better to take the time to carefully review the proposals, get what what the consensus thinks is the best deal, and then present it to the voters.
However, I think Sly James will continue to try to shove something through because he wants a legacy.
The highly regarded local political consultant Steve Glorioso has also been agitating the council to hold off on an election, saying it’s likely to lose in November because proponents would not have enough time to educate the voters on the plusses of a new terminal and explain why taxpayer dollars are not an issue here.
I’ve got to think a council majority will come to its senses and throw up the stop sign. This has got to be done right or it will be many years before we can come back to the voters with a new plan.
…I completely agree with you about the JoCo element, too, Bill.