"California Official Weighs Airport Sale to Cut Debt"

Saturday, May 8, 2004

O.C. Weighs Airport Sale to Cut Debt
A management team will explore ways of getting around federal limits on the
use of such assets. The goal: raise enough to eliminate the bankruptcy tab.
By Dan Weikel and David Reyes
The Los Angeles (CA) Times


Searching for answers in a tight budget year, Orange County Supervisor
Charles V. Smith on Friday asked county officials to explore selling John
Wayne Airport as a way to eliminate almost $850 million in debt left from
the county's 1994 bankruptcy.

It's not clear whether potential buyers - such as Los Angeles or Newport
Beach - would be interested. But even if they were, there's a more
fundamental problem: Selling a commercial airport to raise money is
virtually impossible because federal law prohibits the use of airport assets
and proceeds for anything other than an airport.
 
Appearing at one of the county's ongoing budget hearings, Smith ordered
county staff to create a management team, including County Counsel Ben de
Mayo and Airport Director Alan Murphy, to find a way around the federal
limitations. "I don't want the report to list 15 reasons why we can't do
this," Smith told De Mayo. "I want the report to say how to do it."

The supervisor said he did not see any other way to pay off an outstanding
debt of $847.8 million and free up funds for threatened programs.

The county's proposed budget for fiscal year 2004-05 is $4.5 billion.
Officials expect a $40-million revenue shortfall. The annual debt payment on
funds borrowed to recover from the county's 1994 financial debacle is at
least $70 million a year.

"My motivation is to resolve the problems left over from the bankruptcy and
the $70-million-plus that is going down the drain to pay it off every year,"
Smith said. 

Smith said he has been thinking about selling John Wayne Airport ever since
the county first floated the idea as a way out of bankruptcy.

A task force was formed, but the Board of Supervisors discontinued the
study. Murphy and Newport Beach City Atty. Robert Burnham, who has worked on
airport issues, said there were considerable legal hurdles at the time.

Today's situation is similar.

"It's illegal under federal law to spend airport money other than for
operations and things that affect the airport," Murphy said. "You can't use
airport revenue for the county's general fund."

John Wayne Airport, which handles more than 8.5 million travelers a year,
covers 500 acres and includes runways, terminals, businesses and
concessionaires. The field is a former Army Air Forces base, given to the
county by the federal government after World War II. Under terms of the
grant, it must remain an airport "in perpetuity."

Airlines and the Federal Aviation Administration also have a stake in the
airport because they pay fees and provide grants for improvements, Murphy
said. "The public and federal government have an investment in the airport,
and they may not want to have the county sell it off."


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