Monday, August 21, 2017
BEHIND THE SCENES: EXPLAINING KANSAS CITY AIRPORT REVENUE BONDS AMID BURNS & MAC SINGLE-TERMINAL RIGGED BID!!!
An important perspective from tax fighters on the financial reality of a crucial decision under consideration for MCI . . .
What some Airport developers don't want you to know about Airport Revenue Bonds!
Over the next few days and weeks ahead many important decisions will be made about the Kansas City Airport. These decisions will affect us for the next
generation. It’s important that we all understand what is being discussed and even more importantly what is not being discussed publicly.
The City Council will be voting on a number of airport related ordinances this week including how to finance the airport. Councilwoman Shields has
proposed an ordinance calling for airport revenue bonds to be used. This will require a vote of the people and the interest rates for airport revenue bonds are much lower than private financing. The flying public should not be forced to pay millions of dollars more in interest payments. Councilwoman Shields proposal is the best way to finance the work to be done on the airport. The next few paragraphs will help explain CFRG’s position.
At last week’s Mayor’s Town Hall, held at the historic Gem Theatre, Mayor Sly James painstakingly made clear over and over again that the money made at the airport - by the airport- has to stay at the airport - for airport stuff. That the money generated by the airport cannot be used for roads, bridges, parks, zoos or anything else the city needs cash for. That is absolutely positively unequivocally true-sort of . . .
The airport, entirely owned by the City of Kansas City, is an enterprise fund. Enterprise Funds are established by governmental entities to operate a particular endeavor-in this case the airport. The funds used to operate the enterprise and funds generated by the airport are segregated (that is kept separate) from all other city funds and activities. These funds have to stay within the confines of the airport at least up until now. While our mayor has not figured out how to deal with the severe floods plaguing much of Kansas City nor how to quell the violent crime that is killing so many of the city’s residents he and his team have spent long painstaking hours to figure out how to liberate the funds generated by the airport out of airport.
This cash liberation will be done through debt and unnecessarily expensive construction projects at the airport. City Hall first stumbled onto this in 2011 when City Hall needed money to cover its TIF giveaways and borrowed $10 million from the airport. The city has been talking about either borrowing money for the airport thru Port KC, KCATA, or privately through the developer and not the more traditional airport revenue bonds. If the city were to borrow through Port KC or KCATA there would be no public vote on the debt. Port KC and KCATA would receive a healthy spread for their willingness to arrange the financing. This spread could mean tens of millions of dollars for Port KC and KCATA. Port KC has been building offices and apartments in the river market, KCATA runs buses and the streetcar; in addition, they also are building apartments in the river market. This would enable either of the two entities to build more buildings and have them paid in part for by the flying public. Remember a 1-2% spread on $1-billion dollars will buy lots of streetcars and condos. If the city chooses to borrow through the builder, that builder will have a 30-year long windfall.
It’s clear that the only way to finance anything that is done at the airport is through airport revenue bonds.