City takes step toward privatizing St. Louis Lambert International Airport

City takes step toward privatizing St. Louis Lambert International Airport

ST. LOUIS – In a step that essentially starts the clock on the decision whether or not to privatize St. Louis Lambert International Airport, the working group studying the move released on Friday a request for qualifications, or RFQ. The document essentially asks companies interested in bidding to send in details as to what makes them qualified.

Those working on the plan have said all along that the release of an RFQ would signal the beginning of a process that would last about a year and end in a decision whether or not to privatize Lambert.

You can read the entire Request for Qualifications here.

The meaning of “privatization” is somewhat fluid. The RFQ says the proposals being sought would be for a “long term lease.” It also leaves open exactly how the city would be paid, describing one of the goals of any deal to be “net cash proceeds to the City, upfront and/or over time for non-Airport purposes.”  The “and/or” signifies the group’s willingness to consider either a large upfront payment or a lease paid over its duration.

Other goals laid out in the RFQ’s letter to potential suitors include “improvement of the Airport for all stakeholders, including incremental uses of the Airport’s significant excess capacity,” as well as “community and economic development in the St. Louis region.”

Opponents of the process to this point have been vocal. They question the wisdom in putting what they describe as “the city’s most valuable asset” in the hands of a private company or companies. They have also been critical of what they describe as a lack of transparency in the process to this point, something members of the working group disputed in a recent overview story of the issue published by MetroSTL.com.

15th Ward Alderwoman Megan Green was among the first to release a statement opposing the RFQ, on Friday. Alderwoman Cara Spencer of the 20th Ward tweeted in advance of the release earlier this week that the RFQ was coming “with almost no public discussion of what those qualifications might be.”

Asked for comment about the move after Friday’s Board of Aldermen meeting, Spencer simply said, “I think this is a real disappointment for the city.”

St. Louis Comptroller Darlene Green, whose deputy on the Airport Working Group cast the only “no” vote, issued a statement Friday opposing the move and the process as a whole.

“The process exploring privatization of St. Louis Lambert International Airport has been designed by and for special interests,” Comptroller Green said. “Unsurprisingly, this RFQ is shaped by assumptions to appease those interests, and I have no confidence that this process will yield an outcome supportive of public interest.”

Green’s reference to “special interests” is a nod to another ongoing criticism of the process, that key consultants helping to direct it will not be paid unless a decision is made to to move forward with privatization. Spencer and Green, among others, believe that wording in the contract constitutes a conflict of interest because key consultants such as lead financial advisor, Moelis & Company, McKenna & Associates LLC, and project coordinator Grow Missouri Inc. all have millions of dollars riding on a decision to move forward. (Grow Missouri’s president holds a minority investment in MetroSTL.com.)

But some of the city’s most powerful politicians are, to varying degrees, on board with the process. Board of Aldermen President Lewis Reed welcomed on Friday the opportunity to “look at the resumes” of companies that might be interested in making a bid.

“I imagine you have to be very, very solvent and have a long history to even think of something like this,” Reed said when asked about the “weeding out” process the RFQ represents.

He went on to say that there needed to be very clear objectives for the process to move forward beyond the RFQ, something that currently is not guaranteed.

“We have $600 million in debt,” Reed said, referring to what he says the city owes in connection with the airport. “We have to be able to get rid of all that debt and funds to be available to transform parts of the city that have been long left behind.”

In the release sent out by the Airport Working Group, however, St. Louis Mayor Lyda Krewson is quoted supporting the move.

“This preliminary framework is a representation of all stakeholders and their quest to better understand the implications of a privately operated airport,” Krewson said. “As we work through the various steps laid out under the AIPP [The FAA’s Airport Investment Partnership Program], we will be able to understand the potential impact to the city of St. Louis, the airlines’ partnership, and ensuring our airport remains one of the best operated in the nation.”

To this point some of the biggest money behind the airport, the major airlines, have been silent on the subject. Neither Southwest nor American Airlines, Lambert’s two biggest carriers, would comment when MetroSTL.com asked in September. Friday’s announcement suggests, however, that they are on board, which is a must, considering they have “veto power” over any proposed plan.

“Airlines representing over eighty percent (80%) of the airport’s traffic and eighty-five percent (85%) of the airport’s weighted cargo have agreed to the preliminary framework,” the release says, “which enables the City to move forward with the next phase of the process; however, the preliminary agreement does not commit the City or airlines to ultimately move forward with a transaction.”

Working group spokesman LeJuan Strickland would not comment on which airline or airlines are not yet in agreement with the move.  He said that was at the airlines’ request.

“They don’t want names named while they are still negotiating,” he said.

Strickland did confirm that Southwest and American were among those in agreement with the move.

The request for qualifications document is, in large part, a sales pitch of both the St. Louis metro area and the airport itself.  It describe the attractiveness of the community and the facility, essentially offering would-be suitors a list of reasons why they should offer a proposal.

But there are also specific goals revealed, most notably the willingness and ability to make a significant and timely investment in the airport by any potential partner.

“Given the historic development of the Airport, and the subsequent de-hubbing by American, the Airport would benefit from transformative approaches that are more readily pursued by private investors than by the public sector,” the document says.  “Opportunities include: optimization of existing terminal and airfield space, redevelopment of the Airport’s retail and concession offering, development of unused airfield and land with commercial development potential, and enhancement of landside service offerings and related revenues as well as other potential operational enhancements. The City expects that the Airport P3 (privatization agreement) would include a significant near-term capital improvement program.”

The RFQ also begins to lay out a price tag for anyone looking to invest.

“The City currently receives from the Airport an amount pegged to five percent of gross receipts or currently about $6.7 million per year in unrestricted revenue that can be used for non-Airport purposes.  Without other means to keep operating revenue expanding, these revenues are likely to remain relatively constant with growth limited largely to inflation. Ultimately, the City may choose to structure proceeds or lease payments in different ways, including a combination of payments upfront and/or over time, and/or an option that would pay the City a variable amount based on the Airport’s revenues over the life of the potential lease.”

In what some might consider a nod to critics, the RFQ also contains specific language about conflicts of interest among potential bidders.

“As part of responding to the RFQ and Request for Proposals (“RFP”) for the transaction, each Respondent must certify in writing that they agree to comply with a Conflict of Interest Policy. This policy applies to the employment of any City Advisor, including any entity and the principal representatives of any entity that has advised the City on a Transaction.”

The Airport Working Group’s vote to move forward was 3-1. City Budget Director Paul Payne, Deputy Mayor Linda Martinez and Board of Aldermen Financial Analyst Gerard Hollins accounted for the “yes” votes. The lone “no” came from LaTaunia Kenner, who represents Comptroller Green. Other members of the working group, including Alderwoman Marlene Davis and Airport Director Rhonda Hamm-Niebruegge, did not have a vote.

The window for companies to send in their qualification is relatively short. The deadline is Nov. 1, a duration that Strickland described as “somewhat typical” for such requests.

From there, the companies will be evaluated over a period Strickland said would last about 60 days, meaning the far more detailed Request for Proposals, or RFP, would be sent out to companies deemed to be qualified, by either late this year or early 2020. Strickland said the RFP stage was where greater details, such as a plan that would protect current airport employees should a private group come in, would be spelled out.

Critics of the process have noted the lack of a public vote on whether or not to privatize. Working group members defended that decision, saying all a vote would do was give power to the mayor to unilaterally make a final decision, something she felt was less transparent than the current process.

The two sides have also debated how much of a say the Board of Aldermen will have in the process. Spencer and others have said they don’t appear to have a vote, but the city’s attorney went so far as to write Spencer a letter saying that the Boards of Aldermen and Estimate and Apportionment would, in fact, have a deciding vote.

The RFQ spells out the governing process this way:

“Board of Estimate and Apportionment: A majority of the three members of the Board of Estimate and Apportionment (the Mayor, President of the Board of Aldermen, and the Comptroller) must approve any proposed transaction and send it to the Board of Aldermen.

“Board of Alderman: A majority of the Board of Aldermen must approve any proposed transaction. Once this approval is accomplished, there are no further City approvals required.”

The last statement does come with a notation, however, that the Board of Aldermen could call an election on the subject, leaving open the possibility of a final proposal being put in front of voters.

In her statement Friday, the comptroller continued to insist the public should have that final say at the ballot box.

“Requiring a binding public vote on any selected proposal would go a long way in alleviating the public’s concerns about special interests,” Green said. “The citizens of St. Louis are smart enough and informed enough to make important decisions about one of St. Louis’ major assets.”

But those who, to this point, have supported at least investigating the process say something needs to be done to better utilize the airport. Reed specifically mentioned the “billion dollar runway” that was added and opened in 2006 but has never been fully used.

“That is literally a runway to nowhere,” Reed said. “It is very rarely used. And we have a thousand unimproved acres out there. And we have mounting and mounting capital needs coming up.”

Fly 314, the consulting group working with the city on the privatization project, has posted an FAQ page here.

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