Gary airport bidders have different flight plans

2013-09-22T00:00:00Z 2013-09-23T13:29:04Z Gary airport bidders have different flight plansBy Keith Benman keith.benman@nwi.com, (219) 933-3326 nwitimes.com
September 22, 2013 12:00 am  • 

Finalists' proposals for managing and running Gary/Chicago International Airport lay out divergent flight paths for the future of Chicago's third airport.

The proposals, selected by a joint city/airport committee from among 10 responses, were submitted in late August by the GCIA Group and a group led by Aviation Facilities Company Inc., also known as AFCO.

The proposal by the GCIA Group focuses on the completion of nuts-and-bolts airport improvement projects such as runway expansions. In addition, the group pledges to seek out cargo carriers, airlines and a Boeing or airline maintenance facility.

"The main thing is to complete the projects underway with the funds you have, and not issue any more debt, and bring in an experienced airport director and someone who knows how to develop air service for airports," said Ken Sura, president of Axis Consulting Inc., a key member of the GCIA Group.

The AFCO proposal is specific about how revenue sharing with the city and airport authority would work. The proposal lists hangar and support facilities at the airfield as one area for growth and notes interest by industrial and commercial developers for land near the airport.

"We feel our proposal provides the best opportunity for the city of Gary to realize the benefits of a revitalized Gary/Chicago International Airport," AFCO Executive Vice President Steve Forrer said.

The Times recently obtained both finalists' proposals through an Access to Public Records request filed with the Airport Authority.

With the open-ended nature of the Gary airport's request for proposals, it is no surprise it has drawn divergent responses, according to Robert Poole, founder of the Reason Foundation and a nationally recognized expert on privatizations.

"Basically, the city of Gary went out and said, 'We have this white elephant of an airport we want to make viable: give us what you can do,'" Poole said of the privatization effort.

Poole said it is a positive the proposals of both finalists are oriented toward the airport's aviation facilities. He also noted the importance of keeping Boeing Corp. as a tenant there as the airport looks to attract other tenants. Boeing houses its executive jet fleet at Gary and employs about 70 people.

The GCIA Group's proposal emphasizes completing the current $166 million expansion of the main runway as well as completing expansion of the airport's crosswind runway to 5,000 feet.

The AFCO proposal does not deal directly with the expansion of the cross-wind runway.

The runway projects are essential to the airport's and city's ambition to attract further investment, Sura said. They are also essential to fulfilling the requirements of Boeing Corp.

Both GCIA Group and AFCO state there is continuing potential for passenger air service at the airport. Both propose establishing community training centers to prepare people from Northwest Indiana for employment on airport projects.

The joint city/airport committee hoped to have the Airport Authority approve and execute a final contract with a winning bidder by the end of October. But with the appointment of an entirely new Airport Authority board earlier this month, that date has now been pushed back to November or December, according to mayoral aide Bo Kemp.

For development at and around the airport, the AFCO proposal attempts to meet the demands of the joint/city airport committee for $100 million in investment by setting out benchmarks. If $5 million in investment is not attracted in the first 10 years, the 40-year contract term would be shortened to 25 years. If $100 million in investment is not in place by 2043, the contract is reduced to 35 years.

AFCO subsidiary AvPorts Management would use the airport's current revenue sources, including its taxpayer subsidy, to run the airport. The airport currently has a $3.8 million operating budget. In addition, AvPorts would charge a $10,000 per month fee.

If airport revenues versus expenses move into the black in future years, AvPorts would keep 20 percent of that as an incentive fee and the remaining 80 percent would go to the city, under the AFCO proposal.

Both AFCO and the GCIA Group project they could quickly begin cutting airport operating costs, mainly in the area of consultant costs.

In its proposal, the GCIA Group would assign management of the airport to Airport Property Ventures, a company that currently operates Oceanside Municipal Airport, in north San Diego County, Calif. It leaves the specific terms of any agreement open to further negotiations.

The GCIA Group proposal lays out a schedule for extending the crosswind runway, industrial and commercial building, and regional development totaling $157.4 million. The plan relies on current revenues such as passenger charges shared by Chicago airports. It also includes the issuance of bonds that would be paid back by the users or owners of new projects.

AFCO proposes using bond issuance, bank loans and infrastructure funds to build "demand-driven" projects such as hangars and manufacturing facilities.

The GCIA Group wants any money available from the Airport Development Zone used for on-airfield improvements such as the runway expansions, Sura said. The zone is funded by a tax increment financing district that collects about $4 million per year from homeowners and businesses on Gary's west side.

Because it's taxpayer money, use of the funds has been a touchy subject with the public. At a public forum on the airport held at Indiana University Northwest earlier this month, Kemp said funds could be available from the zone and a similar lakeshore area.

"A decision hasn't been made as to how much money from the Airport Development Zone or Lakefront Area will be used for the P3 (public-private partnership)," Kemp said. "But those are two pots of money that are available."

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