CHICAGO — Kansas City, Mo., city council members this week begin debating the next steps in a proposed public-private partnership to overhaul Kansas City International Airport’s terminals after the council threw a wrench in negotiations with the city’s first choice of a private partner.
The council last Thursday rejected in a 9-4 vote an ordinance that would pave the way for city manager Troy Schulte to finalize an memorandum of understanding with Maryland-based Edgemoor Infrastructure and Real Estate LLC, leading to final negotiations on a development agreement and financing scheme.
The members who voted against the pact said their opposition was due to proposed minority contract participation levels and community benefits in the proposal that fell short of their wishes.
Mayor Sly James attacked the vote. “This was a blatant political maneuver by certain people on the council to circumvent the process” because “it didn’t yield the result they wanted,” James said.
The firm was chosen to lead the $1 billion project in September, beating out three rivals including the hometown firm of Burns & McDonnell that first proposed the city consider the design, finance, and build P3 model. Though James had begun the discussions with Burns, it was the council that pushed for a competitive selection process.
Voters approved the planned overhaul, which will replace three existing terminals with a single modern one, and the use of a P3 in a November referendum.
While the council rejected the MOU as it stands, some council members on Monday expressed support for resolving the issues in contention with Edgemoor. A council work session was set for Tuesday. At the same time, two runner-ups have joined forces in case the city opts to drop Edgemoor, and a hearing is set for Thursday on a resolution that calls for the city to drop Edgemoor.
Edgemoor said it was unaware of some of the council’s concerns ahead of the meeting late last week and believes it “should be afforded the opportunity to continue negotiations and develop solutions.”
The hearing is slated for Thursday is on a resolution filed by council member Lee Barnes Jr. that would take the city in a new direction.
His resolution calls on the city to “undertake negotiations toward a memorandum of understanding and other initial contractual arrangements with the KCI Partnership” because the city is unable to “negotiate a satisfactory contract with Edgemoor.”
The KCI Partnership led by AECOM was the runner-up in the selection process. On Monday, the firm announced Burns & McDonnell had joined its team.
For now, “negotiations with Edgemoor remain in effect until the council changes direction via an ordinance or resolution,” said city communications director Chris Hernandez. “Additionally, the manager wants the city to do everything it can to avoid litigation over this issue, because we are committed to getting the terminal built and open by the end of 2021, and litigation will cost us time and money.”
The city manager sought to explain the issues on the council’s concerns over minority participation and the size and scope of the community benefits agreement in a series of tweets over the weekend.
The issue certain members of the City Council are wrestling with is whether construction be completed with “a 100% labor union workforce and still achieve a high MBE/WBE participation which is a stated council priority for the project,” Schulte wrote.
Schulte said that the city needs to proceed cautiously on community benefits, as some proposed funds would not go directly to the airport project or operations, and that could lead to fines and a loss of grants due to stringent FAA rules. “Any use of airport funds non-aviation purposes runs the risk of fines and cancellation of future airport grants,” he wrote.
Other concerns raised by council members include a lack of detail on the financing plans and city costs should the deal fall through.
With the new questions arising over the Edgemoor pact, the KCI Partnership led by Los Angeles-based AECOM and rival Burns & McDonnell announced Monday that Burns had joined the KCI Partnership group. Jones Lang LaSalle was the fourth bidder.
“We just want to be well prepared” should the council decide to end discussions with Edgemoor, AECOM principal Michael Handelman said.
Burns had been considered a favorite in the selection process that later came under fire and resulted initially in calls for the committee that reviewed the proposals to start anew. Those calls were rejected and the city council approved negotiations with Edgemoor.
Burns & McConnell had charged that a city advisor had a conflict of interest because of a past relationship with the Edgemoor team. It also questioned its disqualification over bonding conflicts.
The city’s bond counsel, Kutak Rock, had raised concerns that the Burns financing proposal could run afoul of the city’s master bond ordinance by prioritizing new private debt and that could interfere with the future use of tax-exempt debt. The firm disagreed with that assessment and had supplied an opinion from Gilmore & Bell.
The P3 calls for the design, build and financing of a $1 billion renovation of KCI into a single passenger terminal with 35 airline gates and a 6,500-space parking garage. The city would retain ownership and operational control of the new terminal.
The project is dodging a bullet in the preservation of private activity bonds in the current tax overhaul bill that is expected to be voted on by Congress Tuesday. While the city and Edgemoor had not yet settled on a financing scheme, James said last month the possible elimination of PABs as proposed in the original House version “could throw the project’s future into question.”
After the referendum, Moody’s Investors Service called voter approval a credit positive for the Kansas City airport “because the new terminal would meet the needs of airlines that serve the airport, which have indicated a willingness to provide full recovery of capital costs.”
A final agreement with the consortium, design work, and approval from the Federal Aviation Administration are expected to take at least a year.
