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Posted Aug 20, 2020, 4:24 PM
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Join Date: Aug 2002
Location: Toronto
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Cities Should Sell Their Airports To Close Gaping Budget Holes
Privatizing Airports Is a No-Brainer
August 18, 2020
By Joseph Guinto
Read More: https://www.theatlantic.com/ideas/ar...rports/615331/
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Sell LAX and LEX and PHX and JAX. Put OKC and OAK on the block with DFW and MDW and more. U.S. cities spent billions building these airports, and although hardly anyone knows it, they’re worth billions more on the open market. — Selling airfields is hardly a panacea, but some would fetch enough to allow cities to shore up their shaken balance sheets and, in certain cases, address some of the big issues they’ve been kicking down the road, decaying bridges, polluted rivers, crumbling school buildings. And the buyers are waiting, even during the pandemic.
- The cities of Dallas and Fort Worth, which spent at least $8 billion in today’s money to turn a massive patch of prairie scrub into one of the world’s biggest airports, didn’t get one nickel of that. No city owner would have. The Federal Aviation Administration (FAA) does not allow local governments to use any money from non-aviation profits for anything other than reinvestment in the airports themselves. A city can’t build a baseball diamond with the profits of its airport. It can just build more airport. — If privatization seems extreme or perhaps unsafe, consider that, under FAA rules, U.S. cities, counties, and other public entities can’t actually sell off the runways, terminals, and land that make up their “commercial service airports,” the kind that most of us use to catch a flight. What they can sell are long-term leases to let private companies operate everything at an airport. And the outside operators would still be beholden to the FAA and the Transportation Security Administration and various regulations applied to every U.S. airport.
- Today, more than 100 major airports around the world are privately run. In 2018, three-quarters of all passenger traffic in Europe and 66 percent of all passenger traffic in Latin America and the Caribbean passed through privately run airports, according to Airports Council International. In the United States, privatization was legalized for a limited number of airports in 1997, and in 2018, Congress opened privatization to any U.S. airport. But only one major passenger airport, San Juan’s Luis Muñoz Marín International has been privatized, and a few other airports have privatized certain terminals (including, recently, the newly reconstructed Terminal B at New York’s LaGuardia). Terminal-specific operational leases are fine as far as they go, but they don’t come with the massive, up-front paydays that are part of a full airport lease. The rest of the world knows what the U.S. doesn’t: that privatization pays. A lot.
- “It would, candidly, surprise most people in local governments in the U.S. to find out what their assets are worth,” says Tim Bath, a managing director at PJ Solomon, a financial advisory firm in New York and Houston that works with operators and investors on airport-privatization deals around the world. — Big, public pension funds are among those ready and eager to invest. They want to put their money into public infrastructure such as airports and toll roads because those assets pay out steady returns over decades. “The level of appetite for U.S. airports and other infrastructure is as significant as it was prior to COVID-19, and the amount of investable capital hasn’t gone anywhere,” Bath told me. — John Schmidt, an attorney with Mayer Brown in Chicago, who represented the city of Chicago in its 2008 attempt to privatize Midway Airport, told me that private buyers abroad have cut up-front checks to an airport’s public owner that are worth 17 times the airport’s operating cash flow. Sometimes more.
You could see the following up-front payments, according to multiple infrastructure experts:
• Millions of dollars for very small airports, such as Vicksburg Municipal;
• Hundreds of millions for small international airports, such as the 20-gate Palm Springs International;
• $1 billion to $3 billion for midsize airports, such as St. Louis Lambert International; and
•$5 billion up into the tens of billions, perhaps even $20 billion, for the biggest U.S. airports, such as DFW.
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