Friday, May 19, 2017
KC Council approves $475,000 contract for legal expertise on airport deal
By Lynn Horsley, Joe Robertson, and Diane Stafford
The Kansas City (MO) Star
The Kansas City Council voted Thursday for expensive outside legal counsel to evaluate the unusual proposal from Burns & McDonnell to build and privately finance a new terminal at Kansas City International Airport.
The council voted 11-2 to spend up to $475,000 to have the law firms of Husch Blackwell and Wilmer Cutler Pickering Hale and Dorr help the city review and negotiate a proposed deal between the city and Burns & McDonnell.
The purpose of the review would be to assure that the fast-track negotiations with Burns & McDonnell result in a good deal for the city. The council is supposed to try to approve a preliminary “memorandum of understanding” with the company by June 15. The public would then get a chance to vote on the project in November.
The council approved the spending on the law firms without taking competitive bids. But it is allowed to do so when the purpose of the spending requires special expertise and is deemed to be in the city’s best interest.
The $475,000 will be paid out of aviation funds and is for an unspecified time period. It will likely carry the city through the November election, said Councilman Quinton Lucas, lead sponsor of the legal contract proposal.
Lucas said Kansas City-based Husch Blackwell and Washington, D.C.-based Wilmer-Hale have particular expertise in negotiating large infrastructure projects, both publicly and privately financed.
He said they were deemed to have special expertise after he and his colleagues talked to many Kansas City law firms. He added that the lawyers will have an incentive to try to make the deal work for the city and not to have it fail.
“Nobody wants to be the transactional lawyer who comes in and destroys a deal largely that the city wants,” Lucas said. But he also said they’re expected to give the council objective and wise advice on crafting the best deal possible, “so we can give the public an independent voice for review.”
Council members Scott Wagner and Scott Taylor voted no. Taylor questioned the price, saying, “A half-million dollars is pretty substantial.”
Lucas said the contract doesn’t obligate the city to spend the full $475,000, but he also didn’t think that was too much to spend in what could be a $1 billion airport terminal project.
Supporters of the independent legal counsel said that given the compressed four-week time frame to approve a preliminary agreement, they wanted a “thorough analysis of the proposed term sheet.”
The counsel will also help structure the deal so that it addresses the concerns of the public, the airlines and workers. It will also take into account the “potential risks and cost to which the city and area flying public may be exposed” in case financial conditions change or any parties to the deal run into financial difficulties, including insolvency.
Charles Renner, an experienced development attorney with Husch Blackwell law firm, was appointed to lead the outside counsel group.
Renner said after the council meeting that he was “looking forward to having the opportunity to contribute to the work the mayor and City Council are doing, as they focus on answering what many see as a once-in-a-generation question.”
Renner, who has experience with major public-private partnership projects in other cities, said the team would begin work immediately.
“Any undertaking can get broken up into design, build, finance, operations and maintenance,” Renner said. “This proposal has roles allocated in all the different spots, and there’s interplay among them. It’s now a matter of making sure that interplay is in line with the understanding that the council members have.”
Burns & McDonnell’s counsel, Dave Frantze, said it “absolutely” made sense for the council to hire outside legal help.
It is also essential, Frantze said, that the design process and the financial details meet all of the requests for transparency as voiced by City Councilwoman Alissia Canady.
Though privately financed, it would be the city’s project and subject to open-records requirements, said Ray Kowalik, the CEO of Burns & McDonnell.
Kowalik said the company so far has risked its investments in the KCI work on speculation, knowing the council and the community must be satisfied.
“We have to be as transparent as possible,” he said.
Prior to the vote on legal counsel, Kowalik addressed the council for more than an hour about the company’s idea. He said Kansas City is at a crossroads with its airport, with one path toward progress and another path that may lead nowhere.
Kowalik urged the council to support the unusual agreement, with his company financing the airport improvements privately in exchange for the company having the exclusive right to design and build that improvement.
“One way is a path to a new, innovative, one-terminal airport,” Kowalik said, in defense of his company’s proposal. Passing on this opportunity, he said, creates “a road to uncertainty,” and one that may leave the city without good options for its airlines and flying passengers.
“Doing nothing at KCI is not an option,” he said.
Kowalik addressed key concerns that the public has had:
“This is what we do,” Kowalik told the council. “This is a labor of love. … This is KC pride.”
Nothing is guaranteed, he acknowledged. Burns & McDonnell’s investment will rely on both the satisfaction of a majority of the City Council, and then the approval of a majority of the voters if a plan gets on the November ballot.
Failure at any point would leave the company and the city in a long delay with no readily apparent “Plan B.”
“I hope that Plan B isn’t a new CEO” for Burns & McDonnell, Kowalik said, partly in jest.
He asserted the company is specially qualified — ranked third nationally in airport design with experience working on 350 airports — with a commitment to its home base.
“We have worked in this industry for over 75 years and earned the trust of the airlines and the airports. We’ve also worked hard to earn the trust of the Kansas City community.”
The ordinance for the city and Burns & McDonnell to negotiate a “memorandum of understanding” was introduced Thursday and faces more council and public discussion.
The first public hearing is set for 5:30 p.m. Tuesday at the Marriott at KCI, 775 Brasilia Ave. The next would be at about 9:30 a.m. May 25 in the 26th floor Council Chambers at City Hall. There is likely to be another hearing June 8 and possibly one the morning of June 15, with details to follow.
Many people have asked why the city didn’t ask for competitive proposals to build airport improvements. City Manager Troy Schulte said Thursday every proposal that had been floated to the city in the past year was more expensive than what the airlines said they could afford. So the city had been assuming it would ultimately be issuing $1.25 billion in municipal aviation bonds, with voter approval.
But then Burns & McDonnell proposed the idea for private financing that it said was as economical as the airlines supported. The city had not contemplated something like that.
Mayor Sly James was largely silent at Thursday’s meeting, although he is a staunch supporter of the Burns & McDonnell plan.
Afterward, he said any other company could have brought an innovative approach to the city, but Burns & McDonnell was the company that did so.
“We were sitting there, and they called us and said, ‘We’ve got an idea.’ Why didn’t somebody else step up with the idea?” James asked. “This is an idea in the making, and it’s an idea that has great benefits to the city.”
Whether the full council will be comfortable enough to push the plan forward in time for a fall election remains to be seen.
“We should come to an agreement not under duress,” Lucas said, but with enough time and clarity that the council knows it is an agreement “we want.”
So far, the airlines have not publicly endorsed the Burns & McDonnell proposal. Dan Landson, a media representative with Southwest Airlines, KCI’s largest carrier, sent a statement to The Star on Thursday:
“It’s too early to comment on specifics since we don’t yet understand the full scale of what’s being proposed. However, we’re supportive of the plans for a single terminal and we’re pleased the City is leading an effort to advance the airlines’ recommendation from April 2016,” Landson said in the statement.
“The approach outlined by the city leaders is innovative, has potential and we’re interested in learning more about it. We’re also looking forward to working together with the city on these discussions.”
The city has posted answers to some key questions at kcmo.gov/faq-newkci. It is also soliciting public comments about the plan at www.kcmomentum.org.