No cash falling from sky for Gary airport

2013-09-21T22:45:00Z 2013-09-23T00:22:06Z No cash falling from sky for Gary airportBy Keith Benman keith.benman@nwi.com, (219) 933-3326 nwitimes.com
September 21, 2013 10:45 pm  • 

Any notion of someone arriving at Gary/Chicago International Airport soon with a suitcase stuffed with cash to invest are dispelled by the two finalist bids to privatize its operations and development.

The written proposals submitted by GCIA Group and Aviation Facilities Company Inc., also known as AFCO, on Aug. 26 contain no upfront payment for the city or airport and outline only modest rates of development for the airport in the next several years.

The lack of any upfront payment doesn't surprise Robert Poole, a national expert on privatizations who consulted on the blockbuster $3.8 billion lease of the Indiana Toll Road.

"I would have been pretty astonished if anyone would take the risk of offering a significant upfront payment," Poole said. "The city was being optimistic about that."

Poole said usually when an upfront payment is sought in a privatization deal, the facility being leased already has a robust revenue flow. By contrast, the Gary airport operates at a deficit and could remain taxpayer-subsidized for some time.

In addition, the airport's request for proposals issued July 22 included a requirement that bidders show a plan for investing or attracting $100 million in projects over a period of years.

It may seem that amount of investment would rapidly accelerate growth at the airport, but a survey of development there over the last decade shows it has moved at a similar pace.

In 2009, the Indiana National Guard completed the building of a $28 million armory and flight readiness center at the airport. The year before, the Gary Jet Center opened a new $5 million hangar and followed that by opening another $5 million hangar four years later.

In its proposal, AFCO states it has a goal of attracting at least $2.5 million in on-airport development in the first three years of its contract. Overall, it wants to attract at least $5 million in development at the airport and its vicinity during the first 10 years. It states $100 million is the goal over 30 years.

The GCIA Group's proposal lays out an investment table that relies mainly on the airport's current capital projects revenue until 2016, when it hopes to have bonds issued that would be paid back by the users or owners of new projects.

City officials remain hopeful they might still see an upfront payment when a deal is closed.

Mayoral aide Bo Kemp, who sits on the committee that selected the two finalists, said negotiations for a final deal are ongoing and and the upfront payment remains a topic.

"What an ultimate deal may look like is not what you have in front of you right now," Kemp said.

Neither finalist has offered to pay the up to $800,000 in bills the airport has run up for advisers on the privatization deal. The joint city/airport committee has made it known it wants the winning bidder to pay that tab.

The AFCO proposal leaves the subject of the $800,000 tab to further negotiations. The GCIA Group proposal does not even mention that payment and a group representative expressed doubt any bidder would be willing to pay it. 

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