A plan to privatize St. Louis Lambert International Airport took the first big step toward finding a private partner with the launch of a
Three of four voting members of the Airport Advisory Working Group approved the action: representatives for Mayor Lyda Krewson and Council President Lewis Reed, and the group’s chairman, budget director Paul Payne. A representative for Comptroller Darlene Green group opposed it.
The action came quickly during a special meeting Friday after lengthy closed session discussion at a Wednesday meeting. Responses are due Nov. 1.
“The city invites interested parties to respond to the RFQ regarding the airport P3 in the form of a long-term lease for the operation of the airport, which is owned and operated by the city ... the RFQ is intended to identify qualified parties that best meet the following required standards for: airport technical and professional ability and experience” and “financial capacity, stability and reputation.”
The city is seeking “to structure a transaction that meets the city’s primary objectives: improvement of the airport for all stakeholders, including incremental uses of the airport’s significant excess capacity. Net cash proceeds to the city, upfront and/or over time for non-airport purposes. Community and economic development in the St. Louis region,” the RFQ continued. About $600 million of existing airport debt would also be retired.
While the process for finding a private operator remains in the early stages and layers of approval will be needed from the city’s aldermen and Lambert airlines to federal agencies, the release of a RFQ marks a big leap in the process that began when then-Mayor Francis Slay pitched the idea in March 2017.
“Having reached this point, we’re now able to proceed to the next stage of evaluating this potential opportunity to enhance our largest asset while at the same time securing significant new funds for the City,” Payne said in a statement.
The FAA accepted the city’s preliminary application in April 2017 and the city then moved to hire advisors. The special working group formally began meeting in July 2018. The airlines have also given their preliminary approval.
Supporters say a privatization deal under what was originally known as the Federal Aviation Administration’s pilot program could provide an infusion of capital for the airport and city infrastructure.
The FAA launched the program to permit privatization of facilities built with public funds in 1996, originally with a five-airport cap that was later raised to 10. The 2018 Reauthorization Act removed the limitation on the number of airports, effectively ending the pilot program, and renamed it the Airport Investment Partnership Program. Only two airports are in the program now.
Opponents like Green believe privatization is unneeded because of the airport’s improved fiscal condition and ability to finance improvements on its own and suggest such a deal is designed to benefit private interests. Green is among the opponents calling for a public referendum.
The private interest allegations about the privatization stem from the involvement of philanthropist-businessman Rex Sinquefield through a not-for-profit in financing the upfront advisory costs and Slay’s decision to join a potential bidder.
“The process exploring privatization of St. Louis Lambert International Airport has been designed by and for special interests,” Green said in a statement after the vote. “Unsurprisingly, this RFQ is shaped by assumptions to appease those interests, and I have no confidence that this process will yield an outcome supportive of public interest. Requiring a binding public vote on any selected proposal would go a long way in alleviating the public’s concerns about special interests.”
Krewson recently said she would not oppose an advisory referendum but aldermen have not taken up that fight.
A timeline
After qualifications are reviewed, a request for proposals would be issued to qualified bidders. The city would then finalize all terms and conditions of the potential deal and a final bidding process would take place.
The final selection would require approval of the Board of Aldermen, Board of Estimate and Apportionment, Lambert’s airlines, and the FAA which holds a 60-day public comment period.
The
The city said in its preliminary application that its goal was “create public-private partnerships that would use innovative ideas to improve airport operating revenues with a private operator.”
The only commercial passenger facility in the program today is the Luís Muñoz Marín International Airport in San Juan, Puerto Rico. Aerostar Airport Holdings is operating the island's primary airport under a 40-year agreement with the Puerto Rico Ports Authority under a deal the FAA approved in 2013.
On Sept. 30, the FAA issued a record of decision for Hendry County Airglades Airport, a general aviation airport in Clewiston, Florida, that a developer wants to turn into an air cargo hub.
Several airports filed initial applications, including Chicago, which was interesting in leasing Midway International Airport, but have since withdrawn them.
The city’s advisory team is stocked with familiar public finance and public-private partnership specialists.
They include John Schmidt, David Narefsky and Mitchell Holzichter from Mayer Brown; Jéan Wilson from Greenberg Traurig; Alethia Nancoo and Tatjana Misulic from Squire Patton Boggs; Peter Czajkowski and Gina Martin from Stifel; Mary Francouer and Rebecca Perry-Glickstein from The PFM Group; and Suzanne Shank and Gary Hall from Siebert Cisneros Shank & Co. LLC. Moelis & Co. is lead financial advisor and McKenna & Associates LLC is also an advisor and Grow Missouri Inc. is the project coordinator.
The airport has continued to access the tax-exempt market, though its most recent deal threatened to become entangled in the politics of the privatization.
In June it sold $97.1 million of new money and refunding airport revenue bonds. Outstanding bonds, including the 2019 debt, would be redeemed or defeased if the airport is leased, according to disclosure in the official statement.
The airport's June deal came after a
Ahead of the sale, S&P Global Ratings raised the airport's rating to A from A-minus and assigned a stable outlook while Moody’s Investors Service affirmed its A2 rating and stable outlook. Moody’s upgraded the airport’s general credit last year.
"The ratings upgrade reflects our view that STL's financial risk profile has improved to strong from adequate," said S&P analyst Scott Shad. "The rating benefits from a strong market position, extremely strong service area economic fundamentals, very strong management and governance, and strong liquidity and financial flexibility."
Southwest Airlines accounts for more than 60% of passengers. The airport about 15 miles northwest of downtown St. Louis serves a metropolitan area of six million and served 15.6 million passengers last year. The airport’s per-passenger cost was down to $8.87 in 2018 from $13.77 in 2013.
