A move to pay consultants who arranged a 40-year privatization deal at Gary/Chicago International Airport up to $2 million is raising questions among industry experts and others.
Particularly in the case of three consultants with success-based contracts, there are questions whether they should be paid at all for a deal that yielded no upfront investment and no project, according to Andrew Vasey, president of Vasey Aviation Group LLC, in Indianapolis.
"It reminds me of 'The Simpsons' episode where a man comes to town trying to sell Springfield a monorail," Vasey said.
The Gary airport authority on Feb. 27 put off action on a resolution to pay the consultants' tab.
Of the three consultants working on success-based contracts, the biggest payday of $500,000 could go to JClark Aviation, of Atlanta, a firm headed by former Indianapolis CEO John Clark. The firm would only be paid that much if the privatization deal is valued at $100 million.
The largest fee of nearly $1 million would go the law firm of Faegre Baker Daniels. But that contract had to be paid even if a privatization contract was not successfully concluded.
In an emailed statement in response to a Times inquiry, Gary airport Interim Director B.R. Lane stated the airport authority board will decide whether JClark Aviation will be paid $500,000. That's the maximum he could be paid under his contract.
"I can say we are very pleased with the outcome of the process," Lane stated.
She added the airport authority had secured "best-in-class partners for both airport operations and the adjacent development opportunities" through the negotiating process Clark managed.
The joint city/airport committee that negotiated the privatization had long maintained the winning bidder would pay the fees. But when the 40-year deal was signed last month with Aviation Facilities Co. Inc. (AFCO), of Dulles, Va., it lacked any such requirement.
The deal signed at Gary requires AFCO to find investors willing to put $25 million into the airport within five years. They must also present a plan for attracting a further $75 million in investment.
There is also controversy around the airport authority's intention to use the Airport Development Zone fund to pay the consultants' tab. The zone receives $4 million per year from property taxes collected on homes and businesses lying in a tax increment financing district (TIF) on the west end of Gary.
Several people familiar with TIF district financing in Indiana contacted last week said using TIF funds to pay consultants' fees on a comprehensive privatization deal would be unusual. Usually the funds are used to pay for infrastructure improvements.
The airport authority has an obligation to the public to make the case that paying the consultants is an appropriate use of TIF funds, said John Ketzenberger, president of the Indiana Fiscal Policy Institute.
"They have to explain how paying a bunch of consultants fits with the purpose of the TIF," Ketzenberger said.
Lane stated in an e-mailed response to the Times that she believes using the Airport Development Zone fund to pay the consultants is consistent with the legally intended purpose of the zone.
The owner of the Gary Jet Center, the airport's longest-serving tenant, said he believes there should be some kind of state review before Airport Development Zone money is paid over to the consultants.
Wil Davis said the sudden move to use the zone fund to pay the consultants is incredible because it was always claimed the winning bidder would pay that expense.
"Once again, it's bait and switch," he said.
Under previous plans the $24 million accumulated in the Airport Development Zone fund was a key part of the funding package for its $166 million runway extension project.
AFCO Executive Vice President Steve Forrer in an email stated his company believes using some of those funds to pay consultants poses no risk to the runway extension or the the airport's development. Lane concurred with Forrer's assessment.