First, on June 14, The Kansas City Star reported that the opening would be delayed six to twelve months. A week later, the delay was confirmed to be eleven months. Among the reasons for the delay: The contractor, Edgemoor, hasn’t finalized labor union contracts, the FAA had yet to approve environmental analyses, and the previous cost estimates relied on dated information and were for fewer gates than the current plan envisions.

In a November 8, 2017 press conference recorded by the Star, City Manager Troy Schulte said, “our goal is to deliver a new terminal to this city by the end of 2021.” But on June 27, 2018, Schulte tweeted, “November of 2021 was never a realistic date.”

The problem—as I have argued repeatedly, and as the video above documents—was that the ballot measure voters approved was so bereft of details that it amounted to a blank check. Before the election, it was disheartening to see that the Star editorial board was so eager to endorse a new airport that it misrepresented the facts, possibly because it was relying too heavily on pro-terminal talking points. Now, of course, the same editorial board is dismayed city leaders aren’t delivering what was promised.

What I wrote in September 2017 remains true today,

Process is important in public policy, and while the Star editorial board and others may be relieved that Kansas City finally has a vendor and we’re cleared for a November vote… to advocate for this plan simply because the process is over amounts to letting policymakers off the hook for years of bad behavior. Kansas City deserves much, much better.

No one should be shocked that the voters of Kansas City are not being given what they were sold. Those we expect to represent the public interest—civic leaders, pundits, and the Star’s editorial board—lose their credibility in calling balls and strikes if they root too eagerly for one side. This was an unforced error.

The post Gratuitous “We Told You So” on KCI Airport Vote appeared first on Show-Me Institute.

On Thursday the President more or less confirmed this, albeit unintentionally. Many of our readers are aware that tech giant Samsung has recalled its Galaxy Note 7 cellular phone because it's, well, exploding. In response, the company has told Note 7 owners to stop using the device immediately. Even the FAA has banned taking such phones aboard airplanes because of the risk associated with the phone catching fire. Rather than try to upgrade the product to avert their catastrophic failures, Samsung is now… replacing all of the devices.

I had not previously thought to compare Obamacare to a device with an unadvertised tendency to explode, but luckily President Obama just painted that picture for us.

Obama compared problems in the law to a bug in new technology. He said, for example, that a company will fix a problem with a smartphone.

"They upgrade it, unless it catches fire and then they just pull it off the market," Obama joked, in a reference to the recalled Samsung Galaxy Note 7 smartphone. "But you don't go back to using a rotary phone. You don't say, we're repealing smartphones."

Along with the joke being a tad tone deaf given the pain the law has put families through, President Obama's analogy is imperfect because by repealing the PPACA we wouldn't be repealing "health care"—just an indisputably broken part of it. As Samsung is swapping one failed product for another that won't set your hair on fire, so should policymakers fundamentally reassess and replace what was and is an ill-conceived health care law that doubled-down on the status quo rather than reforming it.

As the President suggests, sometimes trying to "upgrade" an inferior product can be downright dangerous. After 6 years of poor Obamacare results, it's time for policymakers to move on to something better.

The post Like an Exploding Cell Phone, Obamacare Should Be Replaced appeared first on Show-Me Institute.

I was able to attend the Advisory Group presentation before the Hispanic Chamber of Commerce last week, and the slideshow contained four statements that are either incorrect of very misleading. These include (1) the ‘firewall’ between airport funds and the city, (2) whether city funds can be used by an airport, (3) that all city bonds require a public vote and (4) that no airport has ever defaulted and that the city is not a guarantor.

The Show-Me Institute has conducted a great deal of independent research into the Aviation Department’s claims and the wisdom of large airport projects in general. We would welcome the opportunity to present our findings to the Advisory Group, so that they need not lean so heavily on presentations from the department whose claims they are investigating.

That same day, Fowler forwarded the message to a city staffer with this addition:

Can you have your folks at the city look into these matters, please ?

I am sure this group is looking for exceptions to the general rule and will try to discredit what we have heard in testimony from the Aviation Department and the City finance group.

These are certainly policies and broad statements about the legal ramifications of the airport revenue bonds. Whether there are exceptions, loopholes, etc may be called into question.

Maybe have [the City Attorney] look into potential exceptions, etc.

A few days later, on Feb. 2, Fowler forwarded my note to one of the consultants at Frasca and Associates, who is working with the advisory group, with this addition:

Please see the email we received from a special interest group contesting certain facts we have heard from either the Aviation Department and/or representatives of Kansas City.

Which one of these points would you be credentialed to respond to or could research without much additional time (so we don’t blow our Frasca budget) and which ones would you suggest are more legal issues best handled by independent attorneys ? In other words, are some of these questions Kansas City airport-specific, Missouri law-specific or are they all generic facts around most public airports ?

I would like to discuss this during our planned call on Feb. 4, but wanted to give you advance notice that we need answers on these asap either from you or someone else who is independent. We may be able to get our FAA representative to clarify as well and we intend to pose to him too.

Two weeks after that, on Feb. 17, Fowler sent this note to the same city staffer to whom he initially forwarded my email:

Can you please confirm back to me that someone from the City has followed up with Patrick Tuohey on his email below so he feels like we are paying attention to his messages.  I don’t want him ever saying he reached out to us and nobody ever responded.

Let me say loudly that we reached out to them and nobody ever responded. On March 24, I again sent to advisory group leaders Berkebile and Fowler the following note:

On January 30, I sent the note below indicating that the Show-Me Institute has compiled a good deal of independent research on the proposed new terminal. This research includes matters that ATAG has never covered, including financing and the impact of debt servicing.

My note received no response. Therefore, I am asking that the original January 30 email be considered testimony and be distributed to all members of the Advisory Group and included in whatever testimony is made public.

As of this writing, we have heard nothing. They received our note but apparently were more interested in circling the wagons — and seemingly protecting the Aviation Department from being contradicted — than actually collecting information on the new terminal proposal. Perhaps as a result of failing to accept pertinent testimony, Kansas City Mayor Sly James stated falsely in his State of the City address that funds raised at the airport must remain at the airport.

We cannot know what other groups have asked to present information to the Advisory Group and been rebuffed or ignored. We do know that some groups, such as airport concession operators, have not been heard from and we know that the consultants downplayed important testimony from Southwest Airlines. Observers of the advisory group have complained that it gives the appearance of being one-sided and uninterested in legitimate public dialogue. These internal communications only confirm those fears.

The post Airport Advisory Group Not Really Interested In Input appeared first on Show-Me Institute.

Any airport revenue that’s earned by the airport must stay on the airport to run, operate, maintain that airport…. What they can’t do is take airport revenue and, say, send it down and help operate the city water department. That would be revenue diversion. The money has got to stay there at the airport.

Two days later, Kansas City Mayor Sly James took to the radio to say the same thing.

[Fees] that are generated at the airport stay in the airport, to take care of the needs of the airport… The money from the airport can’t be used for streets and sewers and none of that… Airport money stays with the airport. If you don’t spend it on the airport, it doesn’t get spent.

This is demonstrably untrue; Kansas City does spend airport money on non-airport items. On July 1, 2010, the Kansas City City Council passed Ordinance 100525, which permitted the transfer of $10.2 million from the Kansas City Aviation Department to the Finance Department. This was originally set to be paid back, with interest, by July 1, 2013.

This is legal, we don’t suggest otherwise. But it makes hollow the claim that there is some sort of “firewall” between airport funds and city funds. According to the original Memorandum of Understanding between the aviation and finance departments, the funds were to cover “historical liabilities associated with various TIF projects.” The city was borrowing from the airport to cover tax-funded investments that failed to pan out.

Even worse, the memorandum was changed on April 4, 2013, to give the city more time to repay the loan and therefore incur greater repayment costs. The deadline moved from 2013 to 2016.

New terminal supporters will respond that they mean that the $1.2 billion raised through bonds cannot be used for city projects. This is meaningless. If the Aviation Department goes ahead with its proposal, there’s no barrier from the city taking a future diversion loan. However, the odds are that the airport will be so burdened with debt that not only will it not be able to divert loan money to the city, it may not even be able to cover its own obligations. And that is when the new terminal will look like so many other Kansas City financial misadventures, such as Power & Light and the Citadel, siphoning off the general fund.

Whether the airport diverts money to the city or loans the city funds is largely academic. The point is that Kansas City benefits most from an efficiently run, debt-free airport. That is pretty much what we have now, that is what we ought to keep.

The post Yes, Kansas City Government Uses Airport Funds appeared first on Show-Me Institute.

In the United States, due to significant financing advantages given to publicly owned airports and onerous federal regulations, all but one of the 502 commercial service airports in the United States are publicly owned, most by local municipalities. That one private airport is Branson Airport in southern Missouri. As the case study points out:

The success of Branson Airport may be uncertain, but one of the features of private enterprise is that individuals and companies risk their own capital, not of that of their fellow citizens, in hopes of a larger return.

The other six commercial service airports in Missouri are all publicly owned, the largest of which are Lambert-St. Louis International Airport (STL) and Kansas City International Airport (MCI). However, they also can benefit from partial or full privatization. The most basic level of privatization, contracting airport services, already is in place at both Lambert and Kansas City. These contracts allow the airports to attain services through competitive bidding from the private sector. MCI is one of the few airports to privatize its security screening through TSA’s Screening Partnership Program (SPP).

However, airports in Missouri can go much further in privatizing operations. This includes privatizing the management of airports or even leasing the airports to private entities through the Airport Privatization Pilot Program (APPP). Kansas City considered this option for MCI once before. This program is actually the only way a municipality can use proceeds from its airports on other public goods. However, the program requires a complex negotiation between the local municipality, the FAA, airport workers, and the airlines. As the case study states:

Should Kansas City pursue the APPP route of privatization, the city could expect significant proceeds from the sale. However, it would require complex and lengthy negotiations with the potential buyers, airlines, and the FAA in order to participate in a program with no record of long-term success.

The full or partial privatization of airports can have many benefits for air service in the state, whether it is simply reduced costs or financial gain from an airport sale. The case study “Government Privatization in Missouri: Successes, Risks, and Opportunities” outlines some of the possibilities that might allow Missouri to create an example of airport privatization for the rest of the nation.

The post Privatization: Airport Possibilities appeared first on Show-Me Institute.

The City of St. Clair, located in Franklin County, has an airport problem. Namely, the city is losing money on its small, general aviation airport. As the St. Clair Missourian reported last week, the airport has only four remaining tenants and use of the airport is at an all-time low.

So why not simply put up the “for sale” sign? For the last five years, the city government has been trying to do just that. But due to stringent federal regulations, the sale of even a miniscule airport can be an odyssey for local governments.

In theory, when a municipality builds and maintains an airport, whether that be Lambert-St. Louis International Airport or St. Clair Regional Airport, that government is free to do what it pleases with its property, including selling it. However, if a city has accepted federal money to upgrade its airport, as St. Clair has many times, federal regulations, known as the FAA’s grant assurances, tightly restrict that freedom.

Two of the more cumbersome assurances for a city like St. Clair are Nos. 5 and 25. Assurance No. 5 obligates St. Clair to maintain it as a public airport and not dispose or sell any part of the airport without FAA approval. The FAA will only give approval if St. Clair can show that closing the airport improves aviation in the area. In addition, the dispensation to sell the airport does not free St. Clair from reimbursing the federal government all recent federal grants. This will cost the city more than $750,000.

Assurance No. 25 prevents any revenue from the airport from being used for non-aviation purposes. According to the assurance, money from the sale of an airport is airport revenue. So to sell, St. Clair will have to submit a report on fair market value of its airport to the FAA, and put all sale proceeds from the sale into an escrow account for other regional airports to use on aviation-related purposes. The FAA has already rejected a number of St. Clair’s valuations as too low, further delaying any possible sale.

St. Clair’s experience trying to sell its own money-losing airport should act as a reminder to Missouri municipalities on the complications of having a public airport and accepting federal dollars. It is better to support the development of private airports or lease existing airports to private owners than to spend money and time begging the federal government to let them get rid of a bad investment.

The post What It Takes To Get Rid Of An Airport appeared first on Show-Me Institute.

But recent passenger numbers fly in the face of that. In 2012, total enplanements were down 4 percent from 2011. And 2013 numbers so far are down more than 3 percent from 2012. I recall Green saying to the advisory group that the Aviation Department predicts a growth in passenger traffic of 2.8 percent for 2013. So far, that appears to be wildly optimistic. Way back on July 11, the Show-Me Institute’s Joe Miller wrote:

The determination of some Kansas City officials to construct a new $1.2 billion terminal at Kansas City International Airport (MCI) is based on optimistic projections. Not only do their projections fly in the face of aviation industry trends in the last decade, they don’t even conform with the airport’s own 2012 financial report.

The Kansas City Aviation Department originally used 2006 baseline estimates to justify new terminal specifications. Back then, they predicted 2.8 percent growth in enplanements (the number of people boarding the airplane) from 2006 onward. But they were wrong, and eventually had to revise the projected growth down to 1.9 percent. The growth of passengers in the last decade has fallen even further, to 0.01 percent. This slide in growth started before the financial crisis. Even including the booming 1990s, total growth averaged a meager 1.9 percent from 1991 to 2012.

Those aren’t the only optimistic numbers among the key assumptions. The Aviation Department appears to have lowballed its 3 percent estimation of escalation, a euphemism for cost overruns. According to a February 2009 report from the Airports Council International – North America aimed specifically at  estimating airports’ capital development costs, escalation has averaged 7 percent and has been as high as 11 percent.

Recent construction cost escalation has clearly impacted airport development costs. ACI-NA surveyed respondents about their experiences with increasing construction costs. As shown in Table 2, nearly 60 percent of all respondents to this question reported an increase of greater than five percent for development projects recently bid or re-estimated, with an average of 7% increases for the 45 reporting airports; over one-fifth reported an above 10 percent increase. These increases are well above the general inflation rate of 2.8 per cent. FAA also reported in its latest NPIAS report that “construction costs have increased approximately 11 percent” for the past two years, “due in large part to increases in materials and labor.”

Green took pains to state that these assumptions, which amount to predicting the future, are difficult to make. No one doubts this. In some cases, the estimates are conservative, such as an assumption that the interest rate will be 6 percent. But on important matters such as passenger traffic and cost overruns, the people of Kansas City are likely skeptical, and right to be.

The post KCI’s Overly Optimistic Estimates – Part 2 appeared first on Show-Me Institute.

As with many of the arguments in favor of building a new $1.2 billion terminal, it’s true . . . sort of.

In July and August of 2010, the Kansas City Aviation Department gave $10.2 million to the city of Kansas City in the form of an interdepartmental loan with an interest rate of 3 percent. The initial Memorandum of Understanding (MOU) indicated the loan was “for the use by Finance in connection with the historical liabilities associated with various TIF [Tax Increment Financing] projects” and would be paid back by July 1, 2013. Not surprisingly, the city later renegotiated and the debt won’t be fully paid until 2017, at the earliest.

The Federal Aviation Administration (FAA) says that such loans are legal as long as they are at the prevailing rate of interest (see page 7,720 of the Federal Register). The 3 percent the city is paying is within the prevailing rate of interest.

What is troubling is that the loan from the Aviation Department was going to cover TIF payments the city couldn’t otherwise afford to make. In other words, Kansas City is borrowing money from the airport, with interest, to cover losses it incurred in tax abatements to things such as the Power & Light District. (Gamblers Anonymous includes this activity as one of many signs of addiction.)

A $1.2 billion new terminal will upset an already out-of-balance apple cart. Consider the following:

• MCI is already relying on federal funds to cover losses;
• Federal programs aimed at subsidizing airports are drying up;
• The increased fees and ticket prices that are needed to fund an airport bond will make the airport less attractive to airlines and passengers; and
• If the airport cannot generate enough money to repay its bonds, the city will almost certainly dip into the general funds to cover the payments, just as it has done elsewhere, even when the city is not technically on the hook.

Not only is building a new terminal a bad idea on its merits, but it puts at risk a source of money the city is using to cover losses on all its other bad ideas. Worse yet, a new terminal may turn the Aviation Department from a source of funds for the city to another drain on resources.

The post About Those Aviation Department Funds… appeared first on Show-Me Institute.

The other lesson is that giving these ideas careful consideration is hardly dangerous for the public, given that Chicago has received a $126 million penalty payment from the private investors because they walked away from the agreed-upon deal. So, what KC really needs to do is move forward with this idea while protecting its flank, like Chicago did.

You can get hard details on the credit issues and penalty payments here. The Kansas City Business Journal also has some old reports that indicate how long this idea has been around, and how Mayor Mark Funkhouser supported it (or, at least, supported its consideration) while serving as city auditor.

The post New Airport Possibility for St. Louis and Kansas City appeared first on Show-Me Institute.