DALLAS — New Orleans had hoped to get up to $1 billion from leasing Louis Armstrong New Orleans International Airport to a private operator. But the recent decision by the city to terminate the privatization effort leaves it reconsidering an earlier proposal that included a possible transfer of the facility to Louisiana.
The lease to a private operator would have generated up to twice the proposed $500 million price tag proposed by advocates of a transfer of the airport property to a state agency authorized by the state Legislature in 2008.
However, the New Orleans Aviation Board voted Oct. 21 to withdraw its application with the Federal Aviation Administration for Armstrong International to be one of five airports in the United States to take part in a pilot privatization program.
Nolan Rollins, chairman of the Aviation Board, said the decision was made after determining the city could not obtain a favorable bid for the airport from a private operator.
“The Aviation Board took a long, hard look at what the privatization of Armstrong International Airport would mean to the entire region and have determined that it is not the best choice for this region,” Rollins said.
In a statement issued after the board voted to rescind the application, he said the decision to withdraw was based on an analysis of “the conditions required to effectively privatize public infrastructure and the current state of capital markets.”
Rollins said the end of the privatization effort would allow the airport to move forward with an ongoing capital improvement program that will improve operations at the facility. he said the upgrades would ensure the airport would be “a more effective asset” for New Orleans and the state.
New Orleans used the proceeds from $97 million of Gulf Opportunity Zone bonds to build a consolidated rental-car facility at the airport as part of the capital program.
State Rep. Jeffery Arnold, D-New Orleans, said the withdrawal of the privatization proposal is not an end of efforts to improve the city’s airport.
“Time will tell,” he said. “If we can’t make it work through privatization, then we’ll figure out how it can be done.
“There are a lot of opportunities available,” he said. “We have a new mayor [Mitch Landrieu] with new ideas.”
Federal law prohibits the city from selling the airport, but the transfer of ownership with a compensation package of about $500 million would satisfy the legal requirements, according to Arnold.
Louis Armstrong International Airport is located 14 miles west of downtown New Orleans. Most of the facility is in Jefferson Parish, but a small portion is within St. Charles Parish.
The Aviation Board’s revenue bonds are rated A3 by Moody’s Investors Service, BBB-plus by Standard & Poor’s, and A-minus by Fitch Ratings.
A bill that passed easily through the 2008 Legislature authorized the establishment of a nine-member Southeast Regional Airport Authority to look into a plan advanced by area business interests to bring the airport under state control.
The bill passed unanimously in the Senate and by a 96-to-5 margin in the House. Gov. Bobby Jindal signed the measure as Act 927 on Aug. 8, 2008. It was one of the last bills passed by the 2008 Legislature that Jindal signed, and he did so shortly before it would have become law without his signature.
The measure, introduced by Speaker Jim Tucker, R-Terrytown, authorizes the authority to issue an unspecified amount of revenue bonds to transfer the airport from the Aviation Board to the regional authority.
The bonds would not count against the constitutional limit on the state government’s tax-supported debt.
Louisiana could not actually purchase the airport without being liable for millions of dollars in federal grants. The shift technically would be a transfer of airport facilities from the city to the state.
Advocates of the proposal said the authority could issue up to $500 million of revenue bonds supported by the state’s share of gambling revenues in the New Orleans area to acquire the facility from the city. But the plan lost momentum during the privatization effort and a new city administration has been lukewarm to the proposal.
The plan called for the Legislature to appropriate debt service for the airport bonds of $40 million a year for 20 years. The state’s gambling revenue from the area currently totals $215 million a year.
The regional airport authority is authorized by Act 927 to issue refunding bonds and new-money bonds to finance capital projects at the airport.
The city would use the bond proceeds for much-needed infrastructure and economic development projects.
The New Orleans city charter specifies that proceeds from the sale or transfer of any city property, including the airport, must be placed in the New Orleans municipal trust fund
The bond proceeds would be used to develop five areas in downtown New Orleans between the Mississippi River and Broad Street.
Proponents said the money could serve as leverage to generate up to $2 billion in private investment and $750 million in federal funds.
The areas include a sports and entertainment district adjacent to the Louisiana Superdome, a government complex around city hall, a medical district that includes the new federal Veterans Administration hospital, a theater district, and new recreational and commercial space along a six-mile stretch of the Mississippi River.
The acquisition by the state would require approval by the two-thirds of the New Orleans City Council and by a majority of voters at a citywide election.
The authority’s progress was sidelined Sept. 8, 2009, when the FAA approved the Aviation Board’s preliminary application to turn Louis Armstrong into the first privately operated passenger airport in the United States.
In announcing the FAA’s acceptance of its privatization effort, Dan Packer, the chairman of the Aviation Board at the time, said the city was encouraged by a proposal by investors to lease Chicago’s Midway Airport, which is far busier than the New Orleans airport, for $2.5 billion. The Chicago proposal was later withdrawn, but city officials there said they may seek new bids on the airport.
The New Orleans airport reported 3.9 million passenger boardings in 2009. Total boardings at Midway in 2009 were 17 million.