By BILL ALLEN
Earlier this year Mayor Antonio Villaraigosa’s Los Angeles Economy and Jobs Committee released its report of 100 recommendations for job growth and a stronger economy in the city of Los Angeles. The committee’s top recommendation: modernizing Los Angeles International Airport.
It is undisputed that a modern, competitive LAX is vital to the Southern California economy. With approximately 60 million passengers using the airport every year, it is clear that airport improvements will have profound regional, if not international, implications.
In 2006 alone, international flights at LAX contributed more than $82 billion to the regional economy, and each daily transoceanic flight on a per annum basis supported over 3,100 direct and indirect jobs in Southern California. Sadly, we have lost 11 of these daily international flights since 2000, and foreign traffic is down sharply from its peak that same year. Increasingly, foreign flag carriers are threatening to leave unless LAX upgrades its facilities, including most recently Qantas Airways, which has threatened to move its flagship Airbus A380 services to San Francisco.
During these hard economic times, we simply cannot afford to lose many more of these extremely lucrative global routes. We applaud the mayor, city of Los Angeles and Los Angeles World Airports on completing the new south runway, starting construction on the Tom Bradley International Terminal upgrades and completing the first two contact gates capable of handling the new class of jumbo aircraft. However, there is much more that needs to be done and many more billions of dollars required to make LAX competitive again.
The problem is there is very little money available to do so. Airlines have traditionally helped to pay for airport improvements. Unfortunately, the airlines’ mounting losses, expected to be $7 billion-$9 billion this year for domestic carriers alone, preclude them from any significant participation. LAX’s balance sheet can accommodate more debt, but certainly not the many billions of dollars required to realize all the airport’s projects. We also know there is little to no public funding available to pay for these important projects.
There is, however, another very viable potential funding tool in our “toolbox” public-private partnerships. These partnerships are an established vehicle to add new or accelerate existing critical infrastructure projects like airports by harnessing the capital, technical expertise and efficiencies of the private sector and leveraging these advantages with the environmental, quality of life and job creation goals of the public sector.
The public-private investor partnership model is not new; it just has not been used as a part of an overall financing strategy at LAX. Already public-private partnerships have been used locally to finance some very important infrastructure projects demonstrating that local governments can work with the private sector for the good of the economy, the environment and our community. For example, the Alameda Corridor was a $2.5 billion public-private partnership with public agencies, government bodies, railroads, and private investors teaming up to deliver a 20-mile freight corridor that is widely viewed as a model for the construction of a major public project.
Across the United States and the world, many airports have also become public-private partnerships. Generally, projects that make good public-private partnership candidates are revenue-generating facilities. Indeed, just about every major airport has on its premises nongovernment-owned or -operated facilities such as fuel systems, parking lots, car rental facilities, and cargo and terminal buildings.
LAX has a number of ideal potential public-private partnership candidates, including hangars; cargo and transport facilities; and its grossly substandard central utility plant, which was built in 1959.
This approach would relieve LAWA from having to issue debt to finance these projects. Instead, a third party would assume most of the financial risk, while still meeting LAWA’s construction and performance standards and requirements. There is really very little downside. Union jobs would be created sooner. Project delivery times would be shortened. And project costs would almost certainly be reduced.
It is to LAWA’s benefit at this time to use all its available tools including public-private partnerships to ensure LAX is positioned for future growth as the economy improves. Waiting for a better economy will only put LAX and the Los Angeles region further behind other regions when air traffic levels return.
However, it will take civic and political leadership to overcome institutional barriers to public-private partnerships. It will require more than simply articulating a set of recommendations. Our local leaders must “lift people out of their petty preoccupations and unite them in pursuit of objectives worthy of their best efforts,” as influential public interest leader John W. Gardner once said.
L.A. Area Chamber of Commerce President Gary Toebben and Central City Association President Carol Schatz join me in encouraging all of the stakeholders of LAX to use the available resources to modernize this important regional asset. Los Angeles is a world-class city that deserves nothing less than a world-class airport. Only with a flexible strategy that makes use of our entire toolbox can we pursue and achieve this worthy objective.
Bill Allen is president and chief executive of the Los Angeles County Economic Development Corp.