A bid to privatize Westchester County Airport in suburban New York City through a long-term lease may be grounded this year by local politics.

County Executive Rob Astorino struck a $140 million deal with Los Angeles-based Oaktree Capital Management in November, but county legislators pushed to open the process through a request for proposals.

The county issued an RFP on April 3 with the goal of selecting an airport operator on Aug. 21. Astorino is seeking county board approval on Sept. 25, but the political calendar may interfere with this timeline because all 17 county legislators are up for reelection on Nov. 7.

Executive aircraft on the tarmac at Westchester County Airport in White Plains, N.Y. in 2011.
Westchester County, N.Y. has issued a request for proposals seeking a private operator for its airport in White Plains. Bloomberg

“The first proposal really put us off in the wrong direction,” said County Board of Legislators Chairman Mike Kaplowitz, D-Somers, who objected to Astorino not putting the project out to bid. “It was a non-starter.”

The airport proposal from Astorino, a Republican, will need support from 12 of the 17 legislative members. Some lawmakers argue the county executive’s timetable is too ambitious and are pushing to delay the airport vote until after Election Day given the limited number of meetings scheduled in September.

“It’s impossible to put everything out the door in that short a time frame,” said County Legislator MaryJane Shimsky, D-Hastings. “I think it will have to be pushed back until after the election.”

Astorino’s press office did not respond to requests for comment. The Republican, who is running for his third term in November, said in his state of the county speech on April 20 that the public-private partnership airport concept has bipartisan support and will “create a long-term revenue stream.”

Shimsky, who chairs the legislature’s Infrastructure Committee, joined many of her colleagues in opposition to the original P3 proposal not getting opened up for bid and fought for a more transparent process. Rising costs for the county’s police force are among the concerns in the original Oaktree deal she wants addressed with whichever operator is selected.

“We are looking at the budget items where we could end up with extra costs over the years,” said Shimsky. “We have a lot we have to look at.”

To assist with the operator search, Westchester hired New York City-based financial consulting firm Frasca & Associates, which advised on 17 P3 deals since its founding in 1997 including privatizations of Stewart International Airport in New Windsor, N.Y. and San Juan, Puerto Rico's Luis Muñoz Marín Airport.

The San Juan airport is the only airport of significant size to have been and remain privatized through the Federal Aviation Administration's Airport Privatization Pilot Program. Stewart returned to public ownership when the Port Authority of New York and New Jersey took over in 2007.

St. Louis submitted a preliminary application to the program in April for its Lambert Field.

Doreen Frasca, the firm’s president and principal, said she expects four or five bidders to submit RFPs from the U.S., Canada ,Great Britain, Spain, Germany and Australia and is hoping a deal can get finalized by year’s end. Frasca stressed that there is major momentum for a Westchester County airport P3 this year and that could change in the future should the county delay.

“When you have the attention of bidders you don’t want them to split their attention from this airport to another airport deal,” said Frasca. “There is a lot of international interest right now in Westchester.”

The airport in White Plains, 30 miles north of Manhattan, has 757,466 enplanements in 2015, according to FAA data, putting it in the same ballpark as the airports of Dayton, Ohio and Fresno, California. It is served by United, American, JetBlue and Delta.

The Oaktree deal that was halted included a payment schedule that would have front-loaded revenues to the county starting with $15 million the first year, $5 million for the next four years, followed by an average of $2 million annually for the remainder of the lease.

Andrew Crosby, assistant professor of public administration at Pace University, said the arrangement would have set the county up for poor credit conditions for future administrations with a steep decline in recurring revenue after the initial $15 million infusion. Westchester County debt is rated Aa1 by Moody’s Investors Service with a stable outlook.

“Bond ratings agencies typically do not like to see projections of declining revenues over time,” said Crosby. “In the long run relying on short-term budget strategies such as this could have implications for the County's credit rating and thus their borrowing costs.”

Oaktree announced in April it was planning to launch a second bid for the Westchester airport concession. The Los Angeles-based company declined to comment on its plans.

Kaplowitz and Shimsky said the long-term revenue schedule for the county is among their concerns with the original Oaktree deal. Payment terms in the new proposal are not determined yet with the RFP stating that the county reserves the right to negotiate the structure.

“It might work in the short term, but that payment schedule leaves the county bereft of revenues for the last 30 plus years of the deal,” said Shimsky. “We need to ensure the county's fiscal health for the long term, not just until the next election.”

“Good budgeting says you want to separate the revenue out for the long-term and not have a one shot,” said Kaplowitz. “We’re going to visit that issue and with consultation make our own recommendation.”

The winning operator would be tasked with addressing the 1942-built airport’s capital needs including making significant additional investments during the course of the lease agreement, according to the RFP. Revenues from airlines, concessions and ground transportation would back some of the funding sources for the airport enhancements. The operator would also be required to hand back the airport to the county with at least five years of remaining “useful life” at the end of the 40-year lease, which has prompted concerns about long-term capital conditions.

“The private operator would have little incentive to invest in the Westchester Airport in the final five years of the contract,” said Crosby. “Westchester County could face significant capital needs if it were to take over the lease at the end of the term.”

Crosby said that privatization of government assets has had both positive and negative results nationally and that the terms of the agreement are critical. He noted that the Indiana Toll Road privatization proved successful for the state, despite the first concessionaire's bankruptcy, since the state invested its roll road proceeds in a capital program that addressed long-term assets. He cautions that in the case of Westchester the government's motivation is largely to plug recurring structural deficits.

“The airport money will solve the County budget deficit for one or perhaps even a few years, but the deficit will remain when the airport money runs out,” said Crosby. “Fundamentally, using long-term assets to pay for short-term expenses is bad budgeting.”

Crosby noted that Westchester risks not receiving enough qualifying bids by the RFP deadline to move forward with a successful P3, emphasizing that interest expressed by some companies does not always equate to actual applications. Chicago’s 2013 attempt to privatize Midway Airport in 2013 never got off the ground after all but one bidder dropped out of the process.

“If Westchester finds itself with an insufficient number of quality bids, legislators may again put the brakes on privatization as they did last year, fearing they are not receiving adequate value or management for their asset,” said Crosby. “Chicago Midway and Westchester are clearly different scenarios, but the lesson may be the same.”

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