Wednesday, February 8, 2012
ONTARIO – The $50 million payment offer from Ontario to gain control of LA/Ontario International Airport is part of a $250 million package the city offered Los Angeles to transfer title and operations of the facility.
According to the transfer proposal, Ontario would assume all financial obligations, outstanding debt and liabilities of the slumping facility.
Ontario officials have been pushing Los Angeles Mayor Antonio Villaraigosa and Los Angeles World Airports, the agency which oversees ONT and Los Angeles International Airport, to either transfer control of the airport or amend the joint powers agreement between the two cities.
If Ontario succeeded in dissolving its joint powers agreement with Los Angeles, city officials say they would be ready to make the payment. Just where that money would be coming from, city officials are not ready to specify, said Ontario Councilman Alan Wapner.
“We have the money,” he said. “It won’t take away from the level of service or take away from the general fund.”
Wapner said city officials have indicated to him that Ontario has the money but is waiting until its business plan for the airport is complete to release those details.
The transfer proposal was presented to Gina Marie Lindsey, executive director of Los Angeles World Airports, the agency which oversees ONT, in December.
Last month, it was revealed by Lindsey that Ontario had offered $50 million to dissolve the agreement between the two cities.
Wapner said he thought it was inappropriate for Lindsey to release the information.
“We thought we were still in negotiations, we had been discussing it in closed sessions,” he said.
But Lindsey sees it differently. The executive director of LAWA said nowhere on the document was it marked confidential nor was it ever indicated to her.
“As for negotiations or terms of transfer, there are no further discussions,” she said.
Lindsey said she would be happy to sit down with the city to discuss how to market the airport.
In the proposal from Ontario, the city would be responsible for paying the remaining $75 million in existing debt obligations.
City officials have also agreed to divert $125 million of ONT’s future passenger facility charge to LAX. The passenger facility charge is a program which allows airports to collect a separate fee for every passenger. Airports use these fees to fund FAA-approved projects.
“We still have to see if the FAA will allow repayment of that money,” Wapner said.
If it were approved, Wapner said Ontario wouldn’t be billed for the $125 million until the costs for an airline to do business at ONT went down.
Currently, an airlines pays an average of $11 per passenger at ONT. The airport’s fees would have to come down to $6 to $7 per passenger before they started repaying the $125 million, he said.
To help those costs go down, Wapner said Ontario would get LAWA to absorb “employees back to the system.” At which point, ONT’s cost per passenger could drop to between $8 or $9 dollars per passenger, making it more competitive.
After reviewing financial documents, Lindsey said the $125 million passenger facility charge figure is now about $128 million. At the same time, because the existing debt fluctuates every month, new figures put the debt at $73 million, she said.
She also expressed concerns about Ontario’s unspecific timeline for payback.
“I would say, if that’s my money, I would be a little worried about being far too unspecified,” she said.
Lindsey said she doesn’t agree with Ontario’s $250 million proposal, adding LAWA has spent about $560 million to build the twin terminals, improve the roadways and install a high-tech baggage system at ONT.
“It’s what you do normally for an airport, invest in its success,” she said. “I think Los Angeles World Airports and the city of L.A. leaned far forward in investing as much in improvements as they did in Ontario.”
During that time, specifically in the 1990s, “LAX was falling apart,” Lindsey said. LAWA was diverting some of its passenger facility charges from LAX to ONT. At that time, improvements could have been made to the nine terminals at LAX, she said.
She also denied claims from Wapner that it is difficult to determine a fair market value of an airport.
“There are several methodologies – one might be better than another – to determine the value. One simple method is to determine the value of land in the Inland Empire.”
Wapner said Ontario officials are still in negotiations, but now with the Los Angeles City Council. A committee of the council is expected to review
the proposal this month, he said.
In the next month, the Ontario City Council is expected to discussed the terms of an airport authority.
For those who may question Ontario’s move, Wapner said they need to take into consideration the economic impact to the region.
“What if we didn’t? How would we deal with 20,000 unemployed people in the valley?” he said. “When we talk about $50 million, that, compared to the regional impact, is nominal.”
