Industry Officials: Federal Guidance Needed to Spur Airport P3s

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DALLAS — Congress needs to set clear guidelines for aviation public-private partnerships and privatization efforts to avoid local conflicts that can hamper private investment in airport infrastructure, industry officials told a House P3 panel on Tuesday.

Airport governance is cumbersome because it requires consensus by federal, state, and local authorities that do not always have the same interests or perception of issues, said Andrew "Gil" Morgan, chief operating officer of Propeller Airports, a unit of Propeller Investments.

"There are too many layers of oversight that must sign off on airport P3 and privatization proposals," Morgan said at the roundtable session of the special public-private partnership panel created in January by the House Transportation and Infrastructure Committee.

"Local governments do not always understand what P3s can mean to airport operations and the economic benefits they can bring," he said. "Public-private partnerships can improve the aviation infrastructure and create jobs by bringing private-sector efficiencies to airports."

The approval process could be streamlined if Congress, through the Federal Aviation Administration, would provide an outline of how P3 and privatization programs should proceed, Morgan said.

"Congress should take the lead in developing P3 and privatization formulas that make sure that local taxpayers are not solely on the hook for billions of dollars in airport infrastructure spending," he said.

Airport P3 projects have been common in Europe and South America for years, Morgan said, because international airports in those countries are operated by the national governments.

"When a decision has to be made, it happens quickly," he said. "U.S. airports are falling behind in infrastructure efforts while overseas P3 projects are popular and successful."

Airport authorities and domestic airlines are getting more comfortable with privatization and P3 proposals, said Emmett McCann, a partner with HighStar Capital, an infrastructure investment firm involved in the privatization of Puerto Rico's Muñoz Marín International Airport.

"The federal government should provide a road map of best practices in aviation P3s and privatization, saying this is what worked and what did not," McCann said.

Not all airports are equal, he said.

"For every great airport, there's an airport run solely by political appointees with no clear plan for moving forward," McCann said. "Public-private partnerships are not right for every airport, but more can be done."

Both the private and public sectors benefited from Dallas's decision to let Southwest Airlines renovate the passenger terminal at Love Field in Dallas, said Bob Montgomery, vice president for airport affairs at Southwest.

"We delivered the project three years earlier than the city said it could, and at half of their cost," Montgomery said. Total cost of the recently completed project was a little over $500 million rather than the $519 million budgeted for it, he said.

"We were going to pay for the renovation anyway through higher fees," Montgomery said when asked why the airline agreed to fund the project as well as serve as general contractor. "We chose to pay less."

The quick completion of the Love Field project more than made up for the higher borrowing costs that could have been avoided if the city had issued tax-exempt debt for the work, Montgomery said.

"We were able to make quicker construction decisions than could the city," he said.

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