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"Could privatizing airport services help resolve infrastructurewoes?"
Friday, April 28, 2017
Could privatizing airport services help resolve infrastructure woes?
The Airport Privatization Pilot Program has attracted little interest from
cities. But there are some signs that St. Louis' bid could foreshadow a wider
movement toward public-private partnerships.
By Emily M Rasinski
The St. Louis (MO) Post-Dispatch
A St. Louis proposal to explore options for privatizing management of
city-owned Lambert Airport was green-lighted this week by the Department of
Transportation. It could be the first step toward making the airport the
nation's second to operate under private management.
The city had previously applied to the Airport Privatization Pilot Program
(APPP), created by a 1996 federal law that allows city- and state-controlled
airports to enter into leases and other agreements for services, development
and management. St. Louis still needs to select and negotiate a deal with a
private operator, and secure support from city boards and a supermajority of
Mayor Francis Slay, a Democrat, says leasing Lambert to a private operator
could bring in a windfall of revenues, which the city could then sink back into
its infrastructure projects. He's backed by Grow Missouri, a political action
committee funded by conservative billionaire donor Rex Sinquefield that has
pledged to pick up the tab for a legal and financial review of the proposal.
Mr. Sinquefield has made a name for himself in Missouri and Kansas as a local
free-market crusader. But at least on paper, public-private partnerships, which
preserve local governments' ownership while letting private companies benefit
from long-term concessions, are bipartisan favorites for funding infrastructure
And with the Trump administration promising legislation in support of his $1
trillion infrastructure plan in coming months, St. Louis might be getting a
head start down a path that countless other industrialized countries have
pursued for years.
"I would bet that more cities will start to pursue similar schemes at the
urging of the Trump administration," says Rick Geddes, director of Cornell
University's Program in Infrastructure Policy in Ithaca, N.Y.
So far, President Trump has only proposed specifics on a privatization of the
air traffic control system. But it's likely that the administration will lean
on the private sector to break ground on a wide range of other projects.
In early April, National Economic Council director Gary Cohn suggested the
administration could lend a hand with financing for cities that "sell off"
infrastructure assets, according to Reuters.
And this week, infrastructure task force co-chairman Steven Roth told attendees
at a Bloomberg panel discussion in New York that the administration would be
studying Australia's "infrastructure recycling" program, which reinvests
windfalls generated by the privatization of roads and public utilities into
other kinds of infrastructure - with a 15 percent bonus kicked in by the
Infrastructure experts and advocates of public-private partnerships tend to see
airports, especially larger ones located in urban hubs, as the ideal candidates
for the model's application, because there are so many potential sources of
"There are lots of revenues coming in, so they're very attractive," says Rui
Neiva, aviation policy analyst at the Eno Center for Transportation, an
independent think tank based in Washington, D.C. "Medium and bigger airports,
in general, are very lucrative."
In Europe and Canada, where tax policies are friendlier to private companies
looking to take over management, and carriers exercise less influence over
airport policy, airports have long been operated - and sometimes outright owned
- by private interests.
"In the US, we've been moving very slowly compared to the rest of world in this
regard," says Dr. Neiva.
In two decades of existence, the Airport Privatization Pilot Program has proved
an awkward fit. Only 10 cities and states have sought approval. Of those, only
two completed the process, and one of those, New York state's Stewart
International Airport, later reverted to public ownership.
Last February, a Congressional Research Service (CRS) study concluded that the
lack of interest was because of a several-year-long application process,
restrictions on how much airports can increase rates and charges, and tax
privileges for public bonds that make long-term financing costlier for the
private sector, among other reasons.
The sole US airport that has stuck with the pilot program, San Juan's Luis
Muñoz Marín airport, entered into it in 2009, as a way to gin up lagging
investment and dig away at the $800 million of debt held by the Puerto Rico
That's a common predicament among governments pursuing public-private
partnerships, and in places like Chicago, it has led governments to enter into
bad infrastructure deals in exchange for quick windfalls. Some skeptics note
that although public-private partnerships may seem to transfer the burden of
risks and costs from taxpayers onto private financers, the public often ends up
footing the bill in other ways.
In Spain and Greece, too, taxpayers have gotten the short end of the stick on
airport privatizations. And as the CRS noted, scaling back authorities' control
over airports can lead to the loss of public-sector jobs.
"Hence, a public-sector owner may see few benefits from selling or leasing an
airport to a private operator unless the facility is losing money - and in that
case, private investors might not find the airport an attractive investment,"
But Puerto Rico's medium-hub Luis Muñoz Marín has generally been able to
balance these conflicting interests, as the Bipartisan Policy Institute wrote
last fall: After agreeing to a $1.2 billion plan with an airport-management and
infrastructure-investment group in 2012, the Ports Authority got $615 million
up front, while three terminals were reopened or remodeled and new high-end
retail shops and automated baggage scanners began appearing. And a collective
bargaining agreement signed that same year ensured that airport workers kept
their jobs, or moved to other positions within the Ports Authority.
Whether other airports pursue similar plans could hinge on the overall fate of
Trump's infrastructure legislation. To expand the pilot program - the only
federal path toward privatization of state- and city-controlled airports -
Congress would need to pass legislation, notes Neiva. And even then, he adds,
local and state authorities might be reluctant.
"On the local level, airports are normally owned by the local government or
port authorities, and it's a very nice place to put your political friends," he
"Probably, governors and mayors won't want to change things unless they're
faced with a crisis."
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