By Paul Thompson
June 13, 2017
KANSAS CITY, Missouri – The KCMO City Council acted quickly on Thursday, June 8 to enact recommendations suggested by outside counsel regarding a single terminal bidding process.
City Council had spent more than two hours in closed session on Tuesday, June 6 with lawyers and City staff, with some members hinting afterwards that an extension to the June 20 deadline for companies to submit Requests for Qualifications/Proposals (RFQ/P) for construction of the proposed single terminal airport would be a likely outcome.
“I think we’re looking at what to do next, and what’s the proper process that we need in place to assure that the City and the citizens are protected,” 6th District Councilman Kevin McManus said after the closed session. “There’s a lot of discussion as to the current time frame and whether that gives us enough time to get those protections in place and make sure that we have the right process.”
Second District Councilwoman Teresa Loar noted that during the closed session, outside legal counsel recommended a 45-60 day window to solicit single terminal airport bids. Loar indicated that a significant portion of the Council now favored an extension, adding that a decision on whether to extend the deadline could come as soon as Thursday, June 8.
“I think there is definitely a sentiment to extend it,” Loar said.
The prediction proved correct during the Council’s legislative session on June 8, as Quinton Lucas introduced a resolution to adjust the RFQ/P. The Council handily passed the measure, which would provide members with more authority over the final document and set the path for an extension of the RFQ/P deadline.
The resolution directs City Manager Troy Schule to “substantially comply with all legal advice from outside legal counsel engaged in connection with the proposed Kansas City International Airport Terminal Modernization Project,” and further calls for the City Manager to submit a second addendum to the RFQ/P – or a revised RFQ/P – that heeds previously offered legal advice. What’s more, the resolution directs the City Manager to provide copies of legal advice and the recommendations from outside counsel “prior to recirculation, amendment to, or addendum to” the RFQ/P before the Council’s Tuesday, June 13 work session. The resolution also calls for City Council to determine the final language of the RFQ/P on Tuesday, June 13, prior to distribution.
After the June 8 Council meeting, Lucas described the circumstances that led to the adoption of the resolution.
“I think the last several weeks have precipitated it. You know, we’ve had a lot of stuff going on,” Lucas said. “I think it was the sense of this body that we wanted to have more of a role than directing the City Manager about what the next steps were.”
“My assumption would be that the deadline will be pushed back for responses, hopefully providing more of an adequate time frame for more groups to respond,” he added.
Though the resolution does not specifically extend the RFQ/P deadline, Lucas said after last Thursday’s legislative session that an extension is a foregone conclusion.
“This does not officially extend the RFP, although as you’d imagine, if we’re making changes to the RFP on June 13, and it was due on the 20th, it’s certain to,” Lucas said.
Lucas’s resolution wasn’t the only action taken related to the construction of a new single terminal airport. Fourth District Councilwoman Katheryn Shields also introduced an ordinance that would re-consider issuing public airport revenue bonds for the construction the single terminal. Shields said that the payment method, which mirrors what was backed by the airlines in the spring of 2016, would be considerably cheaper than private financing over the long haul.
“We need to have somewhere where we have a discussion about public financing – the selling of airport revenue bonds,” Shields said. “That is the way we have traditionally – and all over the country people traditionally fund either new terminals or improvements.”
When the proposal for a publicly-financed single terminal airport was floated during the spring of 2016, negative polling ultimately caused City Hall leaders to table the idea. After a recent series of public meetings highlighted the need for improvements, however, Shields believes the time is right to broach the subject again.
“Basically, private funding is about two points higher than the City issuing the bonds through airport revenue bonds,” Shields said. “When you’re talking about $1 billion over 30 years, that’s a lot of money.”
Outside of the funding mechanism, Shields described a Council that had coalesced around some of the big airport questions in recent weeks as the process for soliciting qualified bids took several twists and turns. Most notably, a no-bid private financing plan submitted by Burns & McDonnell was shelved and the process was opened up to a competitive bid. But the original RFQ/P put together by the City Manager’s office would have allowed Burns & McDonnell the right to match any submitted bid for the airport renovations, a clause that’s been subsequently eliminated.
“It was incredibly devoid of any kind of detail. Everything that was written, was written in favor of Burns & Mac,” Shields said of the original RFQ/P. “But even more importantly, there were 15 or 20 issues that need to be decided or addressed, and they weren’t even mentioned in the MOU.”
As a result, outside counsel had serious questions.
“Not just the MOU; they had serious questions with how the bid was set up,” Shields said.
With a new resolution and ordinance now passed to tackle some of the big remaining questions, Shields thinks the Council is coming together on a plan of action.
“I think we’re all committed to single terminal, to a November 7 date, to a design-build, and to a competitive process that stands up to scrutiny,” Shields said. “I think the issue that remains is, are we publicly or privately financing?”
In a follow-up press release sent to constituents on Friday, June 9, Shields emphasized that the repayments for the publicly-financed bonds would be paid from airport revenues at no risk to taxpayers. She went on to describe the economic benefits of financing the proposed single terminal airport with airport revenue bonds.
“Because Article VI, Section 27, Airport Revenue Bonds are tax-free, they can be offered at lower rates than any privately-issued bonds: 3.5 or 4% as opposed to 5.5 or 6%,” Shields wrote. “This is why private financing – however well-intentioned – would increase costs by approximately $400 million over the 30 year life of the bonds. That would be a massive increase in cost with no benefit to the city or airlines.”