Consequences Of New Kansas City Airport: Fewer Options & Higher Prices

The basic rules of supply & demand govern the bad deal at #NewKCI as the plan continues to crash & burn.

Money line . . .

"If KCI is too expensive for these low-cost airlines, they may just stop serving Kansas City altogether. Less competition at KCI will mean higher fares, higher parking fees, and so on to cover the monstrous amount of debt that a $2 billion airport terminal requires. And if it is too expensive for the remaining airlines, they may also stop serving KCI. Who makes the bond payments then?"

Read more . . .

KCI Airlines Links New Terminal Costs with . . . Service

How many times have proponents of a new terminal at KCI told us that the costs of enplanements do not bear on ticket prices? The answer is every time. The goal might be to assure voters that nothing was going to change, and that they could confidently vote themselves a free airport.

Comments

  1. This article does not fit the narrative, flatulence, from city hall which is very stifling.

    As someone stated a few days ago the airlines will be bailing on this airport plan, Edgemoor will be shown the door, and the white knight, Burns and Mac, will swoop in to save Slie's ass all according to plan.

    Odds are Go4KC will be on TKC by 8:30 AM claiming how unfair this post is, continuing about a world class city, crying about no solutions being offered, and ending about the great momentum Slie has created.

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  2. ^^Who cares dude. Really? If you say you do, you're a liar!

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  3. Patrick Touhey has been claiming for months now, without evidence, that non-recourse bonds are the same as an appropriation pledge bonds. They are not. No entity is ever on the hook for a non-recourse bond.

    The guy needs to first take a Municipal Finance 101 class and then maybe we can have an intelligent conversation.

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    Replies
    1. Mr 8:45: Independence has been making the shortfall payments on the bonds for the Bass Pro development even though the bond documents specifically state that the city has no obligation to do so - the city's obligation in the bond docs is that the chief finance officer of the city i.e. propose to the elected body in the recommended budget that the payments be made (which indeed is all they every could do because if the bond payments were the general obligation of the city then that would be in the nature of a general obligation bond which per the charter requires voter approval). It is the same situation here isn't it? Scare tactics about the city credit rating hit etc

      -radish

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  4. ^^...and yet nobody cares.

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  5. non-recourse?

    an essential public service such as an airport is a necessity. a main airport can't be allowed to close.

    hence, taxpayers stand behind the finances of an airport de facto, even if indirectly.

    (doesn't mean non-recourse bondholders wouldn't take a haircut, just that taxpayers would be called on for some kind of bailout.)

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  6. Patrick Tuohey11/21/18, 9:50 AM

    Thanks for the link, Tony, Here is a similar piece I wrote about higher airport fees chasing away cheap airlines... three years ago:

    https://showmeinstitute.org/blog/transportation/how-cheap-airport-helps-kansas-city-0

    As for non-recourse bonds, the idea that KCMO would allow the airport to default is fantasy. The city a history for covering expenses even if we weren't explicitly required to do so=, and bond rating agencies would absolutely drag KCMO into the mix. Just look at what they've done regarding Zona Rosa.

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  7. Patrick Tuohey11/21/18, 9:55 AM

    And BTW, default isn't necessary at all for taxpayers to be exposed. The #NewKCI requires 35 years of debt, but airline contracts are only 5 years long. No airline has agreed to back these bonds, they've merely agreed to pay higher rents for the next few years. But if the rent is too high, and for some reason the airport underperforms, or the market is shaken, you can absolutely expect the airlines to want to renegotiate those lease agreements down.

    And if the new rents aren't enough to cover debt payments, who among us thinks the city won't step forward, arguing that we must prop up the airport?!?

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    Replies
    1. Hey Patsy Tony said his check is late this month. Can you see if it's in the mail?

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  8. "without evidence" is now the "well there is evidence but I am choosing to ignore it"

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  9. the taxpayers are going to get ooooooooooooooooh so screwed on this deal anyway you look at it

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  10. Edgmoor claimed the first thing they did was investigate the site. LOLOLOLOL
    Then they gave you nonsensical cut n paste renderings on poster board for a new, smaller airport with three terminals at the location of terminal A, that has nothing to do with the site.

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  11. then they stand there like a bunch of QVC sales people selling a fictional POS bauble and you all buy it.

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    Replies
    1. Bring in Phil Swift for the close. Flextape covers everything.

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    2. Flextape covers outside between the 3 terminals joining all into 1 terminal. Problem solved.

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  12. Yes, its Thanksgiving week and a slow day, otherwise why would I post here?

    Touhey confuses “Appropriation Backed Bonds” with other forms of municipal debt, either because he is ignorant, or he deliberately intends to mislead.

    The Zona Rosa bonds are Appropriation Backed Bonds that were backed by Platte County (not KCMO) and Platte County has the right not to pay the difference. However, if it doesn’t, its credit goes in the tank. Independence did the same thing, but to preserve its credit rating, it is making up the shortfall. Same goes with KCMO on the Power & Light debt. All these were appropriation backed bonds.

    Revenue bonds, such as Airport, Water and Sewer are NOT appropriation backed bonds, but only the business revenues of these entities are pledged to repay the debt. The credit worthiness of these bonds is rated completely independently of other debt, mainly because the city does not pledge anything other than the revenue streams. If the revenue streams come up short, the bondholders take the hit, not the taxpayer. The Airport does not shut down nor is it seized by bondholders. Only the airport revenues are pledged, nothing more. In the case of default, the airport’s credit worthiness would take a severe hit, but that is the extent of the damage to the city.

    Most major airports in the US are not even run by cities. They are run by airport authorities which routinely issue debt. These authorities are independent of any city, county or state. To say that a city, county or state is legally obligated to bail out an airport is simply false.

    Saying that the Airport debt is the same as the Zona Rosa debt is flat out wrong and doing so is either by ignorance or by malice.

    Don’t take my work for it…read here: https://seekingalpha.com/article/4006939-just-appropriation-backed-municipal-bonds

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  13. i thought we lived in a orld where it would be idiotic to give all of terminal A for use as Amazon new HQ and letting them use the same entry as the airport users was idiotic.

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  14. don't flatten the cojones, fill them with gifts.

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  15. well i have learned a lot

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  16. letting an airport fail and close is analogous to letting the big banks fail in 2008.

    the taxpayers bailed put the banks just as they would an airport, notwithstanding the theoretical option of not doing so.

    so, airport bonds of any legal structure, non-recourse or whatever, result in a de facto contingent obligation for taxpayers.

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