O.C. Weighs Airport Sale to Cut Debt

A management team will explore ways of getting around federal limits on the use of such assets. The goal: raise enough to eliminate the bankruptcy tab.
By Dan Weikel and David Reyes
The Los Angeles (CA) Times
Searching for answers in a tight budget year, Orange County Supervisor Charles V. Smith on Friday asked county officials to explore selling John Wayne Airport as a way to eliminate almost $850 million in debt left from the county’s 1994 bankruptcy.

It’s not clear whether potential buyers – such as Los Angeles or Newport Beach – would be interested. But even if they were, there’s a more fundamental problem: Selling a commercial airport to raise money is virtually impossible because federal law prohibits the use of airport assets and proceeds for anything other than an airport.

Appearing at one of the county’s ongoing budget hearings, Smith ordered county staff to create a management team, including County Counsel Ben de Mayo and Airport Director Alan Murphy, to find a way around the federal limitations. “I don’t want the report to list 15 reasons why we can’t do this,” Smith told De Mayo. “I want the report to say how to do it.”

The supervisor said he did not see any other way to pay off an outstanding debt of $847.8 million and free up funds for threatened programs.

The county’s proposed budget for fiscal year 2004-05 is $4.5 billion. Officials expect a $40-million revenue shortfall. The annual debt payment on funds borrowed to recover from the county’s 1994 financial debacle is at least $70 million a year.

“My motivation is to resolve the problems left over from the bankruptcy and the $70-million-plus that is going down the drain to pay it off every year,” Smith said.

Smith said he has been thinking about selling John Wayne Airport ever since the county first floated the idea as a way out of bankruptcy.

A task force was formed, but the Board of Supervisors discontinued the study. Murphy and Newport Beach City Atty. Robert Burnham, who has worked on airport issues, said there were considerable legal hurdles at the time.

Today’s situation is similar.

“It’s illegal under federal law to spend airport money other than for operations and things that affect the airport,” Murphy said. “You can’t use airport revenue for the county’s general fund.”

John Wayne Airport, which handles more than 8.5 million travelers a year, covers 500 acres and includes runways, terminals, businesses and concessionaires. The field is a former Army Air Forces base, given to the county by the federal government after World War II. Under terms of the grant, it must remain an airport “in perpetuity.”

Airlines and the Federal Aviation Administration also have a stake in the airport because they pay fees and provide grants for improvements, Murphy said. “The public and federal governments have an investment in the airport, and they may not want to have the county sell it off.”