Frequently Asked Questions
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Questions about the Potential Lease of the Airport
- What is the purpose of this process?
- Will this process be transparent?
- Who owns the Airport?
- Which groups would need to approve a final agreement?
- Why do the airlines need to approve a public-private partnership?
- What would happen to the employees at the Airport?
- How much money would an agreement with a private airport operator generate for the City? Who gets to decide where that money goes?
- Do taxpayers support the Airport now?
- Is the City currently paying debt on the Airport?
- Has this been done in other cities? If so, what was the result?
- How long do these long-term lease agreements normally last?
- If a new operator is selected, would there still be an Airport Commission?
Questions about the Airport Advisor Team
FAQ about Potential Lease of the Airport
Q: What is the purpose of this process?
St. Louis is considering entering into an airport investment partnership for the operation and management of St. Louis Lambert International Airport.
The City is considering this process to determine if service for our residents, businesses and visitors can be improved, and to explore opportunities to make the Airport into a stronger asset for our economic development efforts.
In June 2018, the City selected Moelis & Company, McKenna & Associates, Grow Missouri, Inc. and other local and national experts to help the City navigate this complex process.
Q: Will this process be transparent?
Yes. The City will engage in a two-stage public procurement process to select a private sector operator. In the first phase, the City will issue a request for qualifications (RFQ) to determine which interested parties have the experience and technical qualifications to operate the Airport. Firms that are deemed qualified by their experience and expertise will be invited to submit proposals, including financial proposals, during the request for proposals (RFP) process.
Q: Who owns the Airport?
St. Louis City owns the Airport. The City will retain ownership under this program.
Q: Which groups would need to approve a final agreement?
Any final agreement to allow a private entity to manage and operate the Airport would require approval from the Board of Estimate and Apportionment, Board of Aldermen, the Federal Aviation Administration and a majority of the airlines that operate at St. Louis Lambert International Airport.
Q: Why do the airlines need to approve a public-private partnership?
Airline approval is mandated by federal statute.
Q: What would happen to the employees at the Airport?
Federal law requires that collective bargaining agreements are honored.
Q: How much money would an agreement with a private airport operator generate for the City? Who gets to decide where that money goes?
The amount of money generated from an agreement would be determined by a number of factors including market and economic conditions. Each firm will evaluate this differently, and submit their proposal to the City for consideration. The City could receive a lump sum cash payment up front, yearly cash payments for the life of the agreement, or a combination of both. The City’s regular legislative process would be followed to determine how any new money would be spent.
Q: Do taxpayers support the Airport now?
St. Louis Lambert International Airport is an enterprise fund which means taxes and fees generated by flights and services at the Airport pay for its operation. The Airport operates at a marginal profit and has been contributing roughly $6 million annually to the City of St. Louis’ general revenue fund. This amount is essentially capped under a federal formula and is not expected to grow.
Q: Is the City currently paying debt on the Airport?
Yes, the Airport has $630 million of debt, which is currently being paid by Airport operations. Under any new agreement all Airport debt would be paid off immediately upon close by a private operator.
Q: Has this been done in other cities? If so, what was the result?
Yes. Airport partnerships with full or partial private services are fairly common around the world, particularly in Europe. In 2016, the Airports Council International-Europe reported that more than 40 percent of European airports have at least some private shareholders.
The San Juan International Airport in Puerto Rico is also now privately operated. San Juan received $615 million upfront in a lump sum payment. Additionally, the private operator agreed to invest $1.4 billion and share airport revenue estimated at $552 million over the term of the lease.
Additionally, a consortium of private companies is funding construction of a new terminal at New York City’s LaGuardia Airport. The consortium will operate the terminal upon its completion. Chicago Midway airport has considered an airport investment partnership process twice — both attempts were unsuccessful, but the City of Chicago netted a profit as a result of the transaction experience.
Q: How long do these long-term lease agreements normally last?
Agreements in Europe are often 30 to 40 years. This is a key term which would be negotiated with potential private operators.
Q: If a new operator is selected, would there still be an Airport Commission?
The Airport Commission would remain in place and active until such time as a private operator takes on the operations of the Airport, at which time the operator would then determine its operational structure.
FAQ about Airport Advisor Team
Q: What is the advisor team’s role?
The advisor team of Moelis & Company, McKenna & Associates, Grow Missouri, Inc. and others will provide insight and analysis on the potential project. The advisors will assemble data to allow bidders to perform due diligence. They will help the City develop a request for proposals, review proposals and negotiate with bidders. The advisors will not make decisions. Decisions will be made by elected officials in City Hall, the Federal Aviation Administration and the airlines operating at St. Louis Lambert International Airport.
Q: Who is paying the advisor team?
Grow Missouri, Inc. is paying the cost of all professional services and expenses incurred by the advisor team. No taxpayer dollars will be spent on this process.
Q: Is it true the advisors get paid more if a lease deal is finalized?
Yes. The contract between the advisors and the City is structured in such a way that while all of the consultants get paid for their work whether a lease is successfully executed or not, most of the consultants are paid more if a lease is completed. This is a common arrangement in the financial services sector.
Q: Can taxpayers trust the advice given by the advisor team?
The advisor team is made up of several highly-regarded firms, each staking their reputations on the quality of service they provide to the City. These firms can be trusted to solicit proposals, manage the request for qualifications process and present the City with all of the facts.
While the advisors do have a financial incentive to advise the City to take a deal, the process is set up to ensure that advisors don’t make the final decision. The City’s Board of Estimate and Apportionment, the Board of Aldermen, the Federal Aviation Administration and a majority of the airlines operating out of St. Louis Lambert International Airport have to approve any deal before it becomes final.
Q: What are the 11 Guiding Principles?
The City of Saint Louis has established 11 guiding principles for exploring a potential airport investment partnership. You can read guiding principles here.
KEY CONTRACT TERMS
The following videos summarize the principal terms of the City Advisor Team Contract approved by the City of Saint Louis Board of Estimate and Apportionment. Read the Term Sheet here.