DALLAS – Four private investor groups vying to take part in financing the $1 billion airport renovation of Kansas City International Airport claim private funding would be more efficient and cheaper than public debt in the long run.
Financial proposals from the four potential partnership groups were discussed by a special Kansas City, Mo. council committee behind closed doors on Monday night but two of the plans were made public afterward. Both would fund the project without any airport revenue bonds issued by the city.
The city asked for proposals to design, build, and finance a passenger terminal with 35 airline gates and an adjacent parking garage with at least 6,500 spaces.
A city council committee last week approved two ballot questions for a November election that would ask voters to approve a terminal replacement project financed through airport revenues.
One would ask for permission to demolish the three existing terminals and build a new, consolidated passenger terminal solely from airport revenues.
The second question, sponsored by Councilwoman Katheryn Shields, would authorize up to $990 million of airport revenue bonds for the terminal. However, airport officials said the request should instead be raised and capped at $1.3 billion to ensure all costs are covered.
The city council has until Aug. 24 to decide whether to put one or both of the questions on the November ballot.
The Kansas City-based engineering and construction firm Burns & McDonnell said in its proposal that private financing would save the city $500 million compared to funding the entire project with conventional airport revenue bonds because work would get under way more quickly and be completed earlier.
"Much of the savings via private financing will be achieved by an aggressive construction schedule that could be shortened by up to 33% versus public financing," Burns & McDonnell said in its proposal.
“We anticipate a permanent capital structure using some combination of privately arranged, capital markets issued, tax-exempt and/or taxable debt financing, private placement deferred-draw taxable debt, subordinated debt, and private equity,” it said in the plan.
Burns & McDonnell is part of the seeking the terminal work KCI Hometown Team, which also includes Americo Life Inc. and Corgan Architects. Also competing for the project is KCI Partnership, a consortium led by Los Angeles-based AECOM that includes Turner Construction and Oaktree Capital Management Ltd. Another group in the competition is BlueScope Construction Inc. of Kansas City in partnership with Jones Lang LaSalle Midwest LLC. A fourth group is Edgemoor Infrastructure and Real Estate LLC, a unit of Maryland-based Clark Companies.
The AECOM-led KCI Partnership group said it would finance the construction of the terminal through a combination of bonds and long-dated equity.
AECOM conceded in its financial proposal that it would cost an additional $14.5 million in interest over 30 years with private instead of public financing. The city could probably issue airport revenue bonds at 3.87%, AECOM said, while it expects to pay 3.99% for privately issued debt.
“This additional cost is more than offset by the estimated $250 million plus in savings that are gained by the private sector efficiencies in executing the project in terms of both construction cost savings and speed of delivery,” AECOM said. “Any project cost overruns or delays will be the responsibility of KCI Partnership, not the city, the airport, or the taxpayers.”
AECOM said it would build the project for 30 annual fixed payments of $69.8 million per year, a total of $2.09 billion over the term of the agreement.
The initial proposal from Burns & McDonnell, which was later withdrawn, put the partnership’s total compensation at $2.6 billion.
Burns & McDonnell’s current proposal said the annual payments could be as low as $58 million per year if a smaller project is authorized but could rise to $80.5 million per year for a project costing $1.05 billion.
Airlines serving the Kansas City airport agreed in 2015 to pay $85.2 million per year in lease payments to fund a $964 million terminal.