Treece Blog: Airport privatization: The case for changeWritten by Dock David Treece | | email@example.com
Several years ago I was having lunch with an outgoing elected official. This person had — at a relatively young age — accomplished much in public service, and was retiring from elected office to focus on career and family. At our meeting I was given a valuable piece of advice, which has guided many of my efforts since then: If you aren’t willing to put your hat in the ring to try to make things better, then you have no right to complain about the decisions other people make or the results that follow.
One day not very long after that meeting, my father and I were talking about broad issues affecting this region. Dad was lamenting — as he is wont to do — the state of Toledo’s airports: their underutilized state, their dilapidated facilities, their recent threats of restrictions due to air traffic control tower closures, and the general mismanagement that goes back decades. We talked about issues we thought were holding back this region’s airports (and the aviation industry in general) and their development.
What was said next, as it turns out, has become the source of much excitement, frustration and consternation as well as personal attacks.
What was said was that if things were so wrong with Toledo’s airports, we as citizens had a right and an obligation to explore opportunities and alternatives that might make them better.
After that talk, our due diligence began. We met with current and former Port Authority officials. We talked to people from the city, current and former airport tenants, and others who had explored various ideas previously. We did all of this to better understand the problems facing businesses at the airports, the users of both facilities, the city as their owner and the Port Authority as their public manager.
We also wanted to understand — in as much detail as possible — the various duties of an airport operator. What they do, what they are required to do, what they elect to do, how they do what they do and who performs specific functions were all items we needed to understand in depth. What we found was startling. First, a great many of the functions being performed by current operating staff were not required.
Almost all of those that were required could easily be scaled back or performed by independent contractors or outside providers.
Two years ago, as talks progressed and our understanding of the airports became more and more detailed, we retained a consultant — one of the best aviation consultants in the world — to conduct a full market feasibility study for both airports. This study has enabled us to understand the strengths, weaknesses, opportunities and threats facing both airports, the likelihood of turning them around under private-sector leadership and the odds and consequences of failure.
From our consultant, we also learned how the transition to a private operator should be structured to avoid the repayment of nearly $100 million in federal funds that were supplied for improvement projects at both airports over the past several decades. Consequently, we are better prepared to ensure that federal funds will be available for future improvements at both airports.
Developing a strategy
Now, having studied the issue comprehensively and having consulted with attorneys and experts, we have developed a strategy that will allow a private entity to step into the management role currently filled by the Toledo-Lucas County Port Authority. We have found a way to transfer the control needed to attract business, help current businesses grow, run both airports profitably, provide greater benefits to the city as the owner of those facilities and get the public off the hook for tremendous outstanding debt in the form of unexpired federal grants.
Up until this point, everything we had done was purely for our own consumption. We wanted — and want — to ensure that we understand as much as possible about the potential alternatives for management of Toledo’s airports. All told, this due diligence process has been ongoing for more than three years and was conducted at our own expense.
To bring the community up to speed on our findings and to get a second opinion on our concept, we ultimately expanded our discussions to include officials from the Port Authority, city and nearby townships. We launched our website ToledoAirports.com in November as a source for up-to-date information and to provide a public forum to discuss the findings of our marketability study, as well as our own business histories and qualifications. Since most people know us for our investment advisory business, we want to make it apparent that we also have a diverse set of business interests and histories in a number of industries, which we think will enable us to be successful private managers of Toledo’s airports, should the city elect to consider an arrangement like the one we plan to propose.
Forum for debate
However, we still weren’t ready to roll out our plan in its entirety. By this time it was the fall of a local election year. There were races going on for the mayor’s office and several City Council seats. We had hoped that our concept for the airports wouldn’t become an election issue, because during elections it seems every issue becomes controversial. This project is far too important for this region to become a mere plank in someone’s political platform. There is far too much to consider for everything to be reduced down to a few talking points.
Now that Mayor D. Michael Collins and several new City Council members have taken office, the airport discussion has resumed and Councilman Rob Ludeman has extended us an invitation for a public hearing before City Council’s Economic Development Committee, which is precisely the forum where debate surrounding this issue belongs.
We hope, in our hearing(s), to have constructive talks with the city and any concerned members of the public. Our goal is to help them explore and understand some of the alternatives available to them for management of valuable, underutilized city facilities. We also intend for everyone — both city officials and ourselves — to walk away with a clear understanding of if and how the city may choose to pursue the alternatives we present. This may be done through a public request for proposals or letters of interest, or by entering into private negotiations.
If the city issues a request for proposals (RFP), it may receive some other bids. However, we can reasonably say we’ve discussed it with a number of the national firms likely to respond to such an RFP and any outside manager is going to charge the city a management fee.
Time to confirm
Since we have not and will not ask the city for such a fee, the city could theoretically negotiate with us directly. This would allow us the time to confirm our answers to a number of questions ranging from the impact on federal funds to the potential closure of the air traffic control tower at Toledo Express, while also permitting us to be far more open with the city in discussing potential tenants we have talked with, as well as plans for development of property at and around the airports.
In any project like the one we have been working on for Toledo’s airports, there are extensive moving parts. There are a number of issues to address, problems that arise and solutions that need to be found. Second and third opinions are always valuable, and it is important that all concerned parties have an intimate understanding of the facts. While we don’t want to do anything that won’t get approval from the FAA, we also want to make sure we have an arrangement that is financially feasible.
Our biggest hope is that hearings with City Council are a launch pad for the exploration and consideration of our proposal. We hope to share our findings with officials from the city and members of the public who are interested, and want everyone to walk away with a better understanding of the potential for positive change at Toledo’s airports.
Dock David Treece is a partner with Treece Investment Advisory Corp (www.TreeceInvestments.com) and is licensed with FINRA through Treece Financial Services Corp.
Tags: $100 million in federal funds, airport privatization, City Council seats, City Council’s Economic Development Committee, Councilman Rob Ludeman, current and former airport tenants, equest for proposals (RFP), FAA, Federal Aviation Administration, Mayor D. Michael Collins, Port Authority officials, Toledo Express, Toledo-Lucas County Port Authority