Van Nuys Airport

Monday, July 19, 2004
City Airport Agency Is Accused of Bias
Companies competing for Van Nuys jet center say Los Angeles World Airports granted David Murdock the lease based on political influence.
By Jennifer Oldham
The Los Angeles (CA) Times

Several companies that want to operate a sought-after jet center at Van Nuys Airport have charged that the Los Angeles airport agency ignored its own criteria to award the lease to billionaire David Murdock, a key contributor to the mayor. At least two of the eight companies that submitted proposals to Los Angeles World Airports to run the 7.3-acre site have filed formal protests with the city attorney and airport commissioners, alleging favoritism and asking the city’s Airport Commission to put aside Murdock’s proposal and recommend another company.

“While we were hopeful that LAWA might have changed its ways, we feel that political influence still characterizes contract awards by the Los Angeles Department of Airports,” Alexander Furlotti, managing officer of PBQ Aviation, said in a statement to The Times. “The Murdock venture fails to meet the city’s own published guidelines.”

Murdock, owner of Dole Food Co. and developer Castle & Cooke, was one of the biggest donors to Mayor James K. Hahn’s 2002 campaign against a San Fernando Valley secession, contributing $100,000. He has also given $1,000, the maximum allowed, to Hahn’s reelection campaign.

Other competitors, however, also have made political contributions, including a $10,000 donation that James Thomas, a principal in one of the other proposals, made to Hahn’s anti-secession campaign.

The Airport Commission is scheduled today to discuss giving airport officials permission to negotiate a lease with Castle & Cooke for what’s known as the Jet Center site.

The site, which has three hangars, two office buildings and a fuel farm, is considered a choice location at the world’s busiest general aviation airport.

Several competitors for the site say an airport selection panel recommended Murdock’s Castle & Cooke Aviation Services Inc. even though its proposal failed to comply with requirements set forth by the airport agency and without interviewing the eight firms that submitted proposals.

Among the points of contention: Castle & Cooke proposes to pay an annual rent that is about 75% less than that offered by at least one other company and plans to build a facility that exceeds zoning limits. Some say it also lacks the required experience to operate a public jet center, under criteria delineated in a request for proposals issued last November by the city.

The allegations of political influence come amid a joint county-federal “pay to play” probe of whether city officials traded lucrative contracts for political donations.

Airport officials deny that they are showing favoritism toward Murdock.

“The evaluation process was fair and thorough. It led conclusively to the recommendation to designate Castle & Cooke for the proposed development,” Paul Green, the airport agency’s chief operating officer, said in a statement. “All department policies and procedures were followed. An independent firm supported the selection panel’s decision.”

Elizabeth Kaltman, Hahn’s deputy press secretary, said in a statement, “Mayor Hahn is confident that LAWA staff conducted a thorough and transparent process.”

The airport agency has declined to release the proposals until after the Airport Commission awards the lease, saying that disclosing them could compromise negotiations.

Airport officials reviewed the submissions to ensure they complied with requirements laid out in the request for proposals, confirmed that the companies had experience and were financially viable, graded the proposals against a list of criteria, and then ranked the proposals, according to a memo written by Kim Day, interim executive director of the city’s airport agency.

A proposal from Skytrails Aviation came in second and PBQ Aviation came in third, she wrote.

Castle & Cooke executives said their proposal lives up to requirements issued by airport officials. “We looked very carefully at the request for proposals and worked very hard to comply with every request that airport staff had,” said Ed Roohan, president and chief operating officer of Westwood-based Castle & Cooke.

According to a staff report provided to airport commissioners, Castle & Cooke proposes to spend $17.5 million to develop 120,000 square feet of new hangar space and 37,500 square feet of office and shop space at the site. The company also agreed to pay $4.7 million in capital improvements over the life of the 30-year lease, $1 million to buy city-owned facilities at the site and $189,420 in annual rent.

Other competitors said airport officials didn’t call them for interviews, which some thought was necessary in order to expand on their proposals.

“I’ve been through a couple of requests for proposals already, and we were always interviewed,” said Mark Sullivan, president of Skytrails, which operates a jet facility at Van Nuys Airport. “I was waiting for the phone call.”

In preparation for a presentation he expected to make, Sullivan said he hired an architect to draft renderings and commissioned a $15,000 “video fly-through” that simulated what the facility would look like as someone approached it or flew above it.

But Sullivan and representatives from other companies said the first time they heard from airport officials was when they received a letter announcing that Murdock had won the selection committee’s endorsement.

The complaints contend that the principals involved with the Castle & Cooke proposal lack the five years of experience, as specified in city documents, to manage a jet operation at Van Nuys Airport.

Castle & Cooke officials disagree, saying some of its principals currently manage about 15 tenants and more than 27 planes and jets in an existing facility at Van Nuys Airport.

“We have been out there for 23 years and some of our senior folks have been on the ground for almost the entire time,” Roohan said.

Competitors also say Murdock already has his share of property at the facility.

“David Murdock already owns two hangars at the Van Nuys Airport, one of which has a fuel farm,” wrote PBQ’s Furlotti in a July 12 letter to the city attorney’s office. “Awarding a third public retail hangar facility with a fuel farm to Murdock’s company creates a monopoly situation which virtually guarantees that fuel prices will not be reasonable as required by the request for proposals.”

PBQ also includes Jon Winthrop, chairman and chief executive of the Air Group Inc., a charter jet company with operations at Van Nuys Airport.

In addition, competitors say that Murdock offered annual rent payments that are substantially lower than other offers.

“I would ask for some explanation as to why LAWA staff unanimously recognized a bid yielding $189,420 in annual rent payments to the city as more favorable than one such as that submitted by LA Jet Center LLC with annual rent payments in excess of $750,000,” wrote Thomas, a developer who is a principal in the LA Jet Center proposal, in a letter to the airport manager at Van Nuys.

Thomas’ partner in the LA Jet Center venture is Mark L. Schmaltz, who is president of Spirit Aviation, a private charter company with operations at Van Nuys Airport.

Roohan said Castle & Cooke proposes to spend less on rent because it plans to demolish the facilities and build a new jet center that would revert back to the city’s control when the lease expires in 2034.

It’s unclear whether any of the other proposals include such extensive construction.

Castle & Cooke also proposes to develop facilities that are substantially larger than allowed by local zoning, competitors charged.

Roohan countered, saying, “At the end of the day, the plan and actual design will need to be approved by every city, county, state and federal authority, and all changes necessary to comply with city codes will be made.”

Some residents who sit on a local oversight body also questioned the process the city used to choose Castle & Cooke.

“I’m concerned about the fairness and equity of what’s going on,” said Coby King, president of the airport’s Citizens Advisory Council.

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