On January 26, 2018, Saint Louis City Mayor Lyda Krewson provided an update on the efforts made to date by her office to explore the opportunities available through the FAA’s Airport Privatization Pilot Program and to lay out expectations going forward. We have reproduced the original letter below and have included hyperlinks that we have independently researched in order to provide insights into the subjects referenced. All linked documents and data are, in our opinion, relevant, but were in no way reviewed or recommended by the author of the original content.
Mayor Krewson’s Update on Airport Pilot Privatization Program (APPP)
City seeking authorization to explore participation in the Airport Pilot Privatization Program
January 26, 2018
Dear Aldermen, Alderwomen, and Airport Commissioners:
I want to take this opportunity to update you on the process being considered for the operation of St. Louis Lambert International Airport.
Last spring, then-Mayor Francis Slay submitted an application to the Federal Aviation Administration seeking authorization to explore participation in the FAA’s Airport Pilot Privatization Program (APPP).
While St. Louis Lambert International Airport has improved significantly over the last few years, no one argues that it is as good as we would like it to be. Our leisure and business travelers desire more direct flights to more locations and better and more competitively priced services. Our regional economy needs additional freight transportation. Achieving better airport service is the highest and primary objective of exploring the FAA’s Airport Pilot Privatization Program.
In April 2017 the FAA accepted our preliminary application, which allows us to begin the process. Pursuing the potential privatization of the airport operation requires significant financial, aviation, legal, and planning expertise of a highly technical nature.
We must thoughtfully define and outline the terms and conditions under which the City will consider a private operator.
A multidisciplinary Advisor Team is needed to consult with and assist in defining those terms and conditions, and ultimately in soliciting and evaluating the qualifications and proposals from potential operators.
To engage a multidisciplinary Advisor Team, the City Counselor issued a request for proposals (an RFP) for professional services in accordance with Ordinance 64102. Today the selection committee consisting of representatives of my office, the Comptroller, the President of the Board of Aldermen, and the City Counselor’s office selected Moelis & Company, LLC, and Grow Missouri, Inc., along with McKenna & Associates, LLC, as our Advisor Team.
The Advisor Team will work solely on behalf of the City of St. Louis. Their fiduciary responsibility is only to the City of St Louis. In addition to the duties mentioned above, the Advisor Team will evaluate the airport’s existing services and its developable land, air, and cargo capacity, and the team will begin identifying credible firms in the global aviation operation market who may bid on the operation.
The following are key provisions of the RFP issued for the Advisor Team that will also be made part of any contract:
(a) no member of the Advisor Team may participate as a consultant, team member, investor, or in any other role with any team that bids to operate the airport when/if we get to that point.
(b) all costs for services and expenses incurred by the Advisor Team will be borne by the Advisor Team at their sole risk, and will be paid by the City only if, and only when, revenues are available from a final agreement to lease and operate the airport.
Full development of the terms and conditions required of any potential operator will be developed in consultation with key stakeholders, elected officials, and the Advisor Team. At this time it is expected that those terms and conditions will include, but are not limited to, safeguards for the traveling public, valuing and retaining our dedicated airport employees, respecting and maintaining collective bargaining agreements, and maintaining the commitment to minority- and women-owned business and employment priorities.
I look forward to working with the Advisor Team and learning more about how others view St. Louis Lambert International Airport—and how we can improve its operation. We expect the process will attract significant expertise and innovation from the aviation field.
The Advisor Team contract also will be approved by the Board of Estimate and Apportionment before the team commences its service.
Deputy City Counselor Michael Garvin and Deputy Mayor for Development Linda Martinez are the leaders of this process and will work closely with the Advisor Team throughout the engagement. They will update elected officials, the Airport Commission, and other interested parties as information becomes available. Feel free to contact them with ideas or questions. We value your input.
In closing, thank you for your interest and participation. Achieving a better airport, more and better service, and an asset that can help drive economic development in our region is the highest priority of this process.
Mayor, City of St. Louis
In a February 2, 2018 letter published by the St. Louis Post Dispatch, former Saint Louis City Mayor Francis Slay outlined several reasons behind his decision to submit an APPP preliminary application in March of 2017, before he left office. We have reproduced the original letter below and have included hyperlinks that we have independently researched in order to provide insights into the subjects referenced. All linked documents and data are, in our opinion, relevant, but were in no way reviewed or recommended by the author of the original content.
We should explore airport’s untapped potential
By Francis G. Slay
Posted to STLtoday.com on Feb 2, 2018
A great deal has been written and said about the effort being undertaken to explore the possibility of improving St. Louis Lambert International Airport, and generating a much-needed infusion of money to invest in our city through the federal government’s airport privatization program. Unfortunately, much of it is ill-informed.
I initiated the process after many years of listening to airport stakeholders and the business community talk about the airport’s massive debt, limited connectivity, significant excess capacity, and how Lambert does not stack up to airports in other cities.
Additionally, the city government’s ability to provide adequate city services at an affordable cost still has not recovered from the recent recession. By necessity, taxes were increased. The city started charging for trash pickup. Neighborhood and affordable housing spending was reduced. Nearly a thousand city government jobs were eliminated, and public safety has been woefully underfunded. The long-term outlook for the city budget, even with a strong economy, remains troublesome.
As I was nearing the end of my term, I wanted to leave my successor with the best options to move our city forward. I became interested in the Federal Aviation Administration’s waiver program, which allows a limited number of airports to explore the option and opportunity of seeking private investment into and operation of local airports, and to use revenue generated by the airport to fund needed city services and neighborhood improvements.
Getting into the FAA program commits the city to nothing. I expect that, unless the city gets a proposal that would keep the airport under city ownership, improve our airport, increase airport revenues without an increased burden on passengers and airlines, protect the jobs of airport employees, and provide a much-needed infusion of cash to stabilize the city’s finances and make investments in our people and neighborhoods, the Board of Estimate and Apportionment and Board of Aldermen would choose the status quo. But, given the untapped potential of our airport and the precarious state of city finances, I believe we owe it to ourselves to explore the possibilities.
To do this the right way, to write a credible application, to ensure we have all of the facts, to know what our airport is worth, to run a competitive, transparent process, and to evaluate complicated lease proposals would require financial experts, aviation and airport consultants, and other professionals. Such a process could cost millions of dollars the city does not have.
So I asked Rex Sinquefield, as a civic gesture, to consider providing the city with the resources needed to explore this option. He generously agreed. He understands that, if this is not a good deal for the airport and the city, it will not happen.
The fact that the city has entered the FAA process does not mean it is committed to entering into any agreement. It is up to the city leadership to make sure that any such agreement is with a qualified, professional operator, and that the arrangement will be good for the city and the airport. I do not believe the Board of Aldermen, or the Board of Estimate and Apportionment, will agree to a long-term lease unless the region gets a better airport, passengers get better service, the airport employees keep their jobs, the airport’s $800 million debt is paid off, and the city gets a game-changing amount of money.
Under federal law, any proposal would also have to be approved by the FAA and the airlines that use Lambert.
Lambert is a diamond in the rough with a tremendous amount of potential to better connect our city and region nationally and internationally and be the catalyst we need to make St. Louis easier to get in and out of and more competitive. The right agreement with the right operator can make that happen.
Sometimes the best deal is the one you don’t make. But, we owe it to ourselves to find out what is possible.
Francis G. Slay is the former mayor of St. Louis.
- https://www.stlouis-mo.gov/government/departments/comptroller/documents/upload/CityofStLouisMO_CAFR-FY17.PDF (Page 126)
Significant excess capacity
1990 Comprehensive Annual Financial Report
Lambert does not stack up to airports in other cities
Government’s ability to provide adequate city services
- https://wallethub.com/edu/most-least-recession-recovered-cities/5219/ (St. Louis ranks 90th)
- https://wallethub.com/edu/best-and-worst-cities-for-first-time-home-buyers/5564/ (St. Louis ranks 167th)
Taxes were increased
Charging for trash pickup
Revenue generated by the airport to fund needed city services
“Over the longer term, ICF believes that Westchester, Saint Louis, or other pioneering airports will demonstrate the value of the FAA APPP (after its success in Puerto Rico) and will use sale proceeds to higher purposes: leveraging large transportation infrastructure development (as Nashville is considering), offsetting unfunded pension liability (as Chicago attempted to do with Midway Airport), or shoring up other public sector needs. If the U.S. Congress modifies, expands, or liberalizes this program, ICF believes that airport privatization in the U.S. will truly take hold.”
Precarious state of city finances
- https://www.stlouis-mo.gov/government/departments/comptroller/documents/upload/CityofStLouisMO_CAFR-FY17.PDF (Pages 8 & 9)
“Total unrestricted net position decreased by $126.8 million for the year ended June 30, 2017. Unrestricted governmental activities net position showed a $1,240.8 million deficit at the end of fiscal year 2017 as compared with a $1,119.3 million deficit in fiscal year 2016.”