Austin could lease its airport to raise hundreds of millions of dollars for urban rail under a proposal that Mayor Lee Leffingwell and top city officials have been quietly exploring for more than six months.
Leffingwell said the initiative holds the promise of paying for both the construction and the ongoing operating costs of a first phase of an electric-powered rail line between downtown and the University of Texas and possibly to the Mueller area in East Austin. Depending on how such a deal is structured, and how much rail the city decides to build initially, Leffingwell said neither a city bond election nor federal money might be needed to start construction.
The mayor, noting that the city’s take from a decades-long airport lease might be diminished by the need to pay back airport debt of $200 million or more, said the city could clear $600 million to $700 million. City officials last year said a 5.5-mile first phase of urban rail from downtown to Mueller could be built for $550 million. The larger 16.5-mile system, which would run down East Riverside Drive to Austin-Bergstrom International Airport, was estimated in 2010 to cost $1.3 billion in the years that it was planned to be built. The city hasn’t provided an updated figure since then.
“We’re trying to find some way to fund part of a mass transit system sometime in 2014,” Leffingwell told the American-Statesman. He said he notified City Council members Wednesday of his intention to put the idea on the May 9 council agenda for discussion. “We’re at the point now of deciding if we want to look at it,” he said.
The Statesman learned of the effort to explore leasing Austin-Bergstrom on Wednesday through city responses to a request under the Texas Public Information Act.
The airport lease idea — which Leffingwell said he had discussed only with Council Member Mike Martinez, a few city staff members and a select group of community leaders — first came up in 2007 and quickly died. Leffingwell expressed skepticism about that proposal at the time.
Its re-emergence — Leffingwell said airport Executive Director Jim Smith approached him with the idea last year after airport privatization deals elsewhere gathered momentum — caught other council members flat-footed Wednesday.
Council Members Sheryl Cole and Bill Spelman said that Leffingwell could have raised the matter during the council’s regular work sessions or at any of the numerous other meetings in which public officials discussed urban rail.
Cole said she wouldn’t vote for an airport lease “without a high level of due diligence,” adding that “at this time, I do not support such a decision.”
Leasing the airport, Spelman said, “is an issue the council and the community needs to have a long discussion about. If that’s how the mayor proposes that we pay for rail, then I think that needs to be on the table now.”
Council Member Chris Riley said he wasn’t concerned about not being a part of discussions to this point. “Ideas come up at various points, and they are not always ready for prime time,” he said. “There are a lot of challenges ahead with rail, and we need to explore all options.”
City documents show that the airport lease discussions date to at least October. Assistant City Attorney Susana Carbajal, in an Oct. 12 memorandum vaguely titled “aviation project,” described the outlines of leasing the airport and emphasized that the “sensitive and political” nature of the idea required that “discretion and sensitivity must be used in researching and investigating this issue.”
Smith, in an Oct. 26 email to airport consultant Leigh/Fisher, said that Leffingwell “is interested in taking a closer look at the FAA pilot program in an effort to help fund a proposed light rail initiative that lacks a funding source.”
The city enlisted the firm — Leffingwell said he didn’t know at what cost — to study the legal and financial implications. That consultant shared the 23-page report with Leffingwell, Martinez and a small group at a March 22 meeting in the mayor’s office. The report, among a myriad of potential challenges, notes that a lease would require the approval of 65 percent of the airlines using the airport.
The city of Chicago in January received Federal Aviation Administration approval to lease Chicago Midway Airport and has begun a bidding process. The airport in San Juan, Puerto Rico, was recently privatized under the same 1996 federal pilot program that would be used in Austin, and dozens of foreign airports, including many of the larger facilities in Great Britain, are run by private, for-profit companies.
The report doesn’t address the key issue of using airport revenue for city needs outside the 4,000-acre airport property. Currently, the city under federal law may use airport profits — typically generated through parking fees and airport concessions — only to make improvements at Austin-Bergstrom. Leffingwell said that no such prohibition applies in the case of up-front payments from a company under a long-term lease.
“My understanding is you could spend it on anything,” Leffingwell said. He added, however, that he favors using any such payments only on transportation projects.
“I would be the first guy to block the door if someone suggested putting the money in the general fund” to cover day-to-day city spending, he said.
Council Members Laura Morrison and Kathie Tovo said such an important decision should only come after considerable scrutiny and public input.
That would mean squeezing a lengthy process into a tight timeline. Urban rail has been discussed in various iterations since 2006. City leaders are now targeting a bond proposal for May 2014 or November 2014.
Leffingwell said a bond election might not be necessary if the city leases the airport. But he said state law would still require a referendum authorizing a rail system. He added that a rail bond election, without airport-lease money, “is still the most promising scenario.”