DALLAS -- Airlines serving Kansas City International Airport want a referendum in November on whether to build a new $1 billion terminal and finance it privately or with revenue bonds.
An election on whether to build the terminal was postponed in 2016 by Mayor Sly James because polls indicated the proposal would be defeated.
Further delays could reduce the airlines’ willingness to fund the project through their annual rent payments, said Steve Sisneros, director of airport affairs for Southwest Airlines, speaking on behalf of all the carriers at Kansas City International (KCI).
“It would be unfortunate if the election was further delayed into 2018, but it’s ultimately the city’s decision to proceed or not,” he said. “The longer it takes for this to move forward, the greater the challenges are to both our customers and our employees who work at KCI.”
The terminal proposal would have to be approved by Kansas City voters under an ordinance adopted by the council in February 2014 that gives residents the final say “before the city demolishes or replaces any terminal at any city-controlled airport.”
Delaying the election would require the airlines to revise the three-year-old estimate of $964 million for the new facility that will replace three terminals with a single building, Sisneros said.
“As you know, rarely do airlines agree on something but in the case of KCI, we are currently in agreement on this,” he said.
Kansas City-based Burns & McDonnell offered in early May to privately finance and build the new passenger terminal that would be operated by the city but engineering firm AECOM said two weeks later that it wanted an opportunity to finance, design, build, and operate the terminal.
AECOM amended its offer to drop the operations and maintenance provisions in its offer after several council members said they did not want the city-owned passenger terminal operated by a private company.
The city opened the project to all bidders on May 30, asking that proposals be submitted no later than June 20.
A “Swiss challenge” process will be used to select the best bid for the terminal project because Burns & McDonnell made an unsolicited offer to privately finance the project, said city manager Troy Schulte. This would allow Burns and McDonnell to match any of the bids or to amend its offer into a better option.
The city will not consider bids from investors that involve private control over the terminal, said council member Jolie Justus, head of the city council’s airport committee.
Burns & McDonnell said it could privately finance the terminal from airport revenues, including federal funding and rent payments from the airlines that are expected to total $85.2 million per year for 30 years.
The city council is expected this week to decide on an ordinance proposed by council member Katheryn Shieldsthat would ask voters to authorize up to $990 million of airport revenue bonds for the project.
The city can issue tax-free debt at lower interest rates than a private partner could, she said.
“That is why private financing, however well intentioned, would increase costs by approximately $400 million over the 30-year life of the bonds,” Shields said. “That would be a massive increase in cost with no benefit to the city or airlines.”
The airlines would prefer private financing over the public option, Sisneros said.
“Southwest and the other carriers believe this private financing concept has a lot of potential to deliver the facility we need at a lower cost,” he said. “The airlines are anxious to get moving on these discussions.”
A recent poll of Kansas City voters conducted by Remington Research Group for Burns & McDonnell found that 55% supported private financing of the project, compared to 38% in support of building the terminal with revenue bonds.
“There’s just no support” for public financing, said Ron Coker, a senior vice president for Burns & McDonnell.
