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Suggested Citation:"Appendix C - Case Studies." National Academies of Sciences, Engineering, and Medicine. 2021. Evaluating and Implementing Airport Privatization and Public-Private Partnerships. Washington, DC: The National Academies Press. doi: 10.17226/26179.
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Suggested Citation:"Appendix C - Case Studies." National Academies of Sciences, Engineering, and Medicine. 2021. Evaluating and Implementing Airport Privatization and Public-Private Partnerships. Washington, DC: The National Academies Press. doi: 10.17226/26179.
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Suggested Citation:"Appendix C - Case Studies." National Academies of Sciences, Engineering, and Medicine. 2021. Evaluating and Implementing Airport Privatization and Public-Private Partnerships. Washington, DC: The National Academies Press. doi: 10.17226/26179.
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Suggested Citation:"Appendix C - Case Studies." National Academies of Sciences, Engineering, and Medicine. 2021. Evaluating and Implementing Airport Privatization and Public-Private Partnerships. Washington, DC: The National Academies Press. doi: 10.17226/26179.
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Suggested Citation:"Appendix C - Case Studies." National Academies of Sciences, Engineering, and Medicine. 2021. Evaluating and Implementing Airport Privatization and Public-Private Partnerships. Washington, DC: The National Academies Press. doi: 10.17226/26179.
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Suggested Citation:"Appendix C - Case Studies." National Academies of Sciences, Engineering, and Medicine. 2021. Evaluating and Implementing Airport Privatization and Public-Private Partnerships. Washington, DC: The National Academies Press. doi: 10.17226/26179.
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Suggested Citation:"Appendix C - Case Studies." National Academies of Sciences, Engineering, and Medicine. 2021. Evaluating and Implementing Airport Privatization and Public-Private Partnerships. Washington, DC: The National Academies Press. doi: 10.17226/26179.
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Suggested Citation:"Appendix C - Case Studies." National Academies of Sciences, Engineering, and Medicine. 2021. Evaluating and Implementing Airport Privatization and Public-Private Partnerships. Washington, DC: The National Academies Press. doi: 10.17226/26179.
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Suggested Citation:"Appendix C - Case Studies." National Academies of Sciences, Engineering, and Medicine. 2021. Evaluating and Implementing Airport Privatization and Public-Private Partnerships. Washington, DC: The National Academies Press. doi: 10.17226/26179.
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105 Austin Bergstrom International Airport, South Terminal A P P E N D I X C Case Studies Transaction Highlights • Austin Bergstrom International Airport had a clear goal of expanding air service, which was met when it chose to redevelop the terminal and adjust the rates and charges structure to attract an ultra-low cost carrier. • Even though Austin Bergstrom International Airport did not use a public procurement process, there was a significant effort dedicated to negotiating commercial terms and the contract as compared to other delivery models. • As of February 2020, the terminal served Allegiant and Frontier airlines flights to over 20 destinations. Airport and Project Context Austin Bergstrom International Airport is a mid-sized airport, located 8 miles outside down- town Austin and was the 34th busiest airport in the nation in 2017 (ACI). The airport serves its 6.8 million annual passengers with over 76 domestic and international destinations. Source: AustinTexas.gov Austin Bergstrom International Airport, South Terminal Procurement Timeline

106 Evaluating and Implementing Airport Privatization and Public-Private Partnerships Austin Bergstrom International Airport is managed and owned by the City of Austin’s Depart- ment of Aviation. The South Terminal was constructed and opened in 2008 as part of a lease agreement with Mexico-based, low-cost airline VivaAerobus. Originally an Air Force facility, the 30,000 square foot building was renovated to meet the minimum standards of the airline. VivaAerobus approached Austin Bergstrom International Airport with an unsolicited request from a new entrant carrier. The airport offered the real estate option and requested that VivaAerobus return with a financing partner and an actual proposed deal. A year into its lease, VivaAerobus was greatly impacted by the swine flu epidemic in Mexico in the spring of 2009. In reaction to the financial loss, VivaAerobus terminated its service to the United States on June 1, 2009. As a result, the South Terminal facility was closed (“VivaAerobus Grounding Austin Flights,” 2009). Project Scope Austin Bergstrom International Airport’s South Terminal was vacant from 2009 to 2012 before propositions to lease the space were made public. The terminal is independent of the main Barbara Jordan Terminal, which contains approximately 660,000 square feet and 25 gates compared to South Terminal’s three gates (Austin Bergstrom International Airport, n.d.). The lessor of the South Terminal is responsible for operations and maintenance of the facilities, gates, and grounds of the terminal. The lessor will also be responsible for funding renovations and updates made to the terminal (Anderson, 2016)). The $12 million renovation has equipped the terminal to service 500,000 passengers each year and has improved the ameni- ties available to travelers (Austin Bergstrom International Airport, n.d.). The canopy-covered facility now offers a variety of dining alternatives, terminal concessions, and kiosks; an indoor and outdoor waiting area with a live stage and bar; two TSA security check lines; a parking and drop-off area for taxis and ride share services; shuttle service to the main terminal; and 1,000 covered parking spaces. Project Procurement In April 2013, Austin Bergstrom International Airport expressed an interest in leasing the terminal. Speaking at the 2018 Airport P3 Summit, Austin Bergstrom International Airport Executive Director, Jim Smith, explained that The South Terminal was initially driven by competitive position with the ultra-low cost business model. There was a time, four years ago, when low-cost carriers didn’t have a presence in central Texas, and we wanted to capture those carriers. We initiated discussion with Allegiant and some of the others about differentiating our service offerings by coming up with an ultra-low cost terminal, where their rents would be about almost half the [rents of airlines located in the] main terminal. This proposition generated interest to an extent that we decided to start the project. In January of 2016, Austin Bergstrom International Airport entered an option-to-lease agree- ment with a private developer, Highstar Capital. The Austin Bergstrom International Airport Executive Director described the approach to Highstar Capital as a discussion of the mutual benefits derived from the project, with an emphasis on “a different rates and charges model to attract ultra-low-cost carriers.” Before awarding the lease to Highstar Capital, Austin Bergstrom International Airport sought city council approval. The Austin Bergstrom International Airport Executive Director explained that Austin Bergstrom International Airport provided information on the privatization and lease structure before this point, “so they are on notice before we begin the procurement and [can begin] the education process.” The Austin City Council approved negotiations, and the project reached financial close in July 2016. The South Terminal is an existing, three-gate, single-story terminal located on the south end of the airport. In 2017, rehabilitation was begun for commercial use and supports

Case Studies 107 ultra-low-cost-carrier tenants including Frontier and Allegiant. The term of the lease agreement is 40 years. Funding and financing for the terminal project are private. Denver International Airport, Great Hall Project Transaction Highlights • Denver International Airport formed an internal committee to shepherd the project through the development phases and ensure coordination across disciplines. • Denver International Airport conducted one-on-one meetings with the developer to determine aesthetic and engineering aspects of the project. • Denver International Airport made a substantial effort to educate its stake- holders, a process that communicated the project’s business case to legislators. • The City of Denver cancelled the contract for convenience in August 2019 after a series of disputes with the contractor could not be resolved. • In total, Denver International Airport paid $183.6 million in termination payments to Great Hall Partners to terminate the contract and settle any out standing claims. • The city issued a $195 million contract to complete construction as a public project in February 2020, with opening at least 3 years behind the original schedule. Airport and Project Context Denver International Airport was the fifth busiest airport in the nation in 2019, serving more than 33 million enplaned passengers. A connecting hub for three airlines (United, Southwest, and Frontier), the airport serves over 215 non-stop destinations, including international flights to 28 cities in 14 countries. Denver International Airport is managed and owned by the City of Denver’s Department of Aviation. The Jeppesen Terminal, which includes the Great Hall, was constructed and opened in 1995 as part of the relocation of the Denver airport to a new site. The terminal was designed to accommodate 50 million passengers each year. By 2016, the Great Hall was nearly 20% over capacity (Boyajian and Kojima, 2017). In that year, the airport experienced 24 consecutive months of record-setting passenger traffic. The Denver International Airport terminal complex consists of a single headhouse, known as the Jeppesen Terminal, and three airside concourses. The Jeppesen Terminal contains more than 2 million square feet of space to house ticketing, baggage claim, ground transportation, international arrivals, retail, office space, and security checkpoints. The Great Hall is a 1 million- square-foot open area of Jeppesen Terminal that most passengers pass through when arriving or departing Denver International Airport. Designed before the implementation of the security requirements following the attacks of September 11, 2001, the Great Hall needed to be com- pletely reimagined to meet the future needs of the airport. The Great Hall Project included the renovation and reconfiguration of a portion of the Great Hall and required a private developer to manage the terminal concession program located in the Great Hall (City and County of Denver Department of Aviation, n.d.). The Great Hall Project was designed to improve the passenger experience by consolidating the airline ticket counter, relocating screening areas to a different level of the Great Hall, modi- fying the baggage handling system, renovating curbside access, and redesigning the terminal concession program for better shopping, dining, and passenger access. Source: The Denver Post

108 Evaluating and Implementing Airport Privatization and Public-Private Partnerships Two issues drove Denver International Airport’s interest in the Great Hall Project. First, Denver International Airport needed to reduce the exposure of travelers and personnel at the screening checkpoints. The terminal’s original design did not accommodate the post- September 11 security measures required for modern airports. Second, Denver International Airport’s anticipated growth posed a business opportunity that captured private sector inter- est in the Great Hall terminal concession program. This private sector interest, then, could be leveraged to address the aging infrastructure and space issues posed by modern security require- ments. These two issues, when aligned in a P3 contract structure, could bring mutual benefits to both the airport owner and its private partner. Denver International Airport would achieve the infrastructure improvements needed in the terminal along with long-term operations and maintenance, and the private partner would gain the revenues generated by Denver Inter- national Airport’s increasing passenger and retail traffic. Denver International Airport, Great Hall Project Procurement Timeline Pre-Procurement Phase Denver International Airport hired a special legal counsel (Nossaman), a procurement advisor (WSP), and a project financial advisor (KPMG) as the internal team to proceed with the procurement process. This team was hired when proposers were shortlisted before the request for proposals (RFP) or any discussions with proposers began in earnest. The consultant team worked with Denver International Airport to develop the procurement strategy, navigate the request for qualifications (RFQ) and RFP processes, and provide support during the evaluation process. Denver International Airport’s chief risk officer and chief financial officer facilitated one-on-one meetings with each of the proposer teams. Denver International Airport also com- pleted a feasibility study nearly 2 years in advance of the procurement start date. During the 2018 Airport P3 Summit, Denver International Airport’s chief executive officer (CEO), Kim Day, remarked that the time spent completing and educating others about the outcomes of the study “[gave us] time to sell our story. However, we were surprised by a change in the city council and the [subsequent] unpredictable reaction to our outreach. After significant invest- ment in educating our city council members, they [now] grasp our challenges and the planned path forward and allowed us to proceed, knowing they had the power to stop us at any time.”

Case Studies 109 Procurement Phase The procurement strategy consisted of a two-step, RFQ/RFP process to select a predevel- opment partner under a predevelopment agreement (PDA) format. A PDA also referred to as a master development agreement, is an agreement in which the private developer is selected to develop a “financially feasible project design in collaboration with the procuring agency, followed by the right of first refusal to develop the project on a P3 basis” (Greene et al., 2017). Per an advisor working on the transaction, Denver International Airport sought creativity that it could not otherwise capture in a typical RFP scope of work. The PDA approach allowed Denver International Airport to select a best value team with the best financing approach and ability to bring expertise in permitting, design and engineering, and technical innova- tion while also giving Denver International Airport the ability to influence the design and entertainment elements after the selection was made. Once selected, Denver Inter national Airport would have the opportunity to work with the predevelopment partner to refine the project’s design and technical requirements and then finalize contract terms based on the con- cepts developed during the predevelopment phase. In January 2015, Denver International Airport held an industry forum to announce the project and gauge community interest in the project. An RFQ was released shortly thereafter. The RFQ response drew the attention of major construction companies, international con- sulting firms, P3 developers, real estate developers, and airport operators. In all, 18 potential primes met with the airport. Five teams formed and submitted statements of qualifications. Denver International Airport then shortlisted four out of five teams in May 2015. According to Denver International Airport’s CEO, We [then] prequalified three teams and worked with each team independently to share our vision, challenges, and requirements. We also shared information on our passengers, brand, and airlines. And then we listened to them: How would they approach the technical and contractual requirements? What inno- vative solutions could they offer? Did they see major risks and fatal flaws? After we established a common understanding, we released the RFP and then engaged in negotiations with the prequalified teams. Denver International Airport received three proposals and was able to select a top inter national consortium as its predevelopment partner in 2016. The final RFP development, issued in February 2016, was preceded by several rounds of one-on-one meetings with the proposers, held in June, August, and October 2015. Award and Selection Three developer teams submitted proposals in May 2016: Ferrovial Airports International Ltd; Westfield Airports, LLC; and, DEN Transformation Team (DT2). Proposals were evaluated using a quantitative score (1 to 4) that represented qualitative values (“Poor” to “Excellent”) per each evaluation criterion. Evaluation criteria were assessed on a 100-point scale, as shown in Table C-1. The evaluation committee was composed of individuals from the City and County of Denver and Denver International Airport and other stakeholders, such as Denver International Airport airlines, Denver community members, and disadvantaged business enterprises. The evalua- tion committee represented different disciplines and subject-matter areas, such as engineering, contracts, finance, and design. Four advisory committees were formed, composed of Denver International Airport staff and advisors. The committees represented financial/deal structure, technical design and construction, concession management, and operations and maintenance. Each committee reviewed proposals and provided qualitative and quantitative analysis to the evaluation committee (“Notice to Apparent Best Proposer,” 2016, p. 5).

110 Evaluating and Implementing Airport Privatization and Public-Private Partnerships In addition to scoring proposals, the evaluation committee interviewed proposers. First, evaluators read each proposal and then identified questions that should be asked of proposers ahead of (and during) the interviews. The evaluation committee and advisory committee chairs as well as the Denver International Airport contract administrator, program manager, and legal counsel were a part of the interview process. Evaluators could ask the advisory committee chairs for additional information to clarify what was heard during interviews. Denver International Airport staff (contract administrator, program manager, and legal counsel) then collected final scoresheets and tabulated final weighted scores (which included scores related to alternative technical concepts). Proposers were ranked in the following order: (1) Ferrovial Airports International Ltd; (2) Westfield Airports, LLC; and (3) Denver International Airport Transformation Team. The difference in scores between the first- and second-ranked teams was fewer than 10 points. The third-ranked team had a score more than 20 points below that of the second-ranked team. The public evaluation debrief noted that (“Notice to Apparent Best Proposer,” 2016, p. 6.): The distinguishing features that set Ferrovial apart included: An overall design and wayfinding plan that best achieved a visionary look for the terminal while staying true to the needs of an operating airport, a management team with a proven track record and personal commitment to this project, with a manage- ment plan that instilled confidence that they will be able to perform and an overall greater level of due diligence with aspirations for high levels of customer experience throughout the entire project. In August 2017, Denver International Airport and the private developer entered into a devel- opment agreement and sought the city council’s approval for contract award. The Denver City Council named Ferrovial Airports International Ltd (Great Hall Partners) as the preferred pro- ponent for the project, and the project reached financial close in December 2017. The term of the development agreement was 34 years, made up of a 4-year construction period and a 30-year operating period. Denver Great Hall Partners was a single-purpose limited liability company formed to enter the development agreement. Ferrovial Airports Denver Great Hall Holdings, LLC, was the indirect holder of 80% of membership interests, and S/JLC, LLC (a joint venture between Saunders Concessions and JLC Infrastructure Fund I) was an indirect holder of 20% of inter- ests in the developer entity. Project Funding and Financing The project’s capital costs were estimated at $650 million, as of December 2017 (Public Finance Authority, 2017). The funds—available for planning, development, design, and Evaluation Criteria Total Point Value Great Hall Design and Customer Experience 25 Commercial and Financial 25 Project Management Approach 20 Management and Delivery of Concessions 15 Predevelopment Performance Plan 10 Facility Operations and Maintenance Services 5 Total 100 Source: “Notice to Apparent Best Proposer,” 2016, Table A, p. 4. Table C-1. Denver International Airport evaluation criteria and point value.1 1The fourth shortlisted team led by Vantage Airport Group withdrew from the process upon being selected for the LaGuardia Airport Terminal B P3 project.

Case Studies 111 construction—are dedicated to paying the design and construction contract amount, opera- tions and maintenance expenditures before substantial completion date, development fee and bid costs, bond issuance costs, interest paid on bonds before substantial completion, senior debt service reserve account and major reserve account, and costs related to the issuance of letters of credit. Great Hall Partners made a $69.4 million equity investment in the project (approximately 10% of the total capital costs). Capital costs were expected to be expended over 50 months. Capital costs are paid through a combination of equity contributions by the developer, proceeds from the issuance of Series 2017 private activity bonds, interest income from bond proceeds, progress payments made by Denver International Airport from its Airport System Fund, and commercial revenues received before substantial completion. The design and construction contract was a fixed-price, lump sum. Progress payments are made during the construction period, and those payment amounts were to come from Denver International Airport’s capital fund (Airport System Fund). Table C-2 and Table C-3 show the sources and uses of funds before the project reached substantial completion. Operations and Handback Provisions After a 4-year construction period, the developer would operate the Great Hall for 30 years. Per the development agreement, Great Hall Partners would manage the terminal concessions program and be entitled to collect concessions revenues. The developer would keep 20% of Sources Amounts in U.S. Dollars Series 2017 Bonds $189,065,000 Premium on the Series 2017 Bonds $25,448,088 Equity $69,445,052 Progress Payments $479,245,000 Concessions Revenue $3,806,685 Total Sources of Funds $767,009,825 Source: Public Finance Authority, 2017. Table C-2. Denver International Airport sources of funds before project substantial completion. Uses Amounts in U.S. Dollars Design and Construction Contract Amount $650,000,000 Operations and Maintenance Expenditures (including Owner Commercial Revenue) $39,452,822 Development Fee and Bid Costs $13,093,524 Bonds – Cost of Issuance Including Underwriters Discount and Other Fees $4,956,613 Bonds – Bonds Interest Reserve Sub-Account to Fund Interest During Construction $37,287,819 Debt Service Reserve Account $5,781,625 Major Maintenance Reserve Account $5,486,585 Letter of Credit Costs $7,083,545 Working Capital $3,828,291 Total Uses of Funds $767,009,825 Source: Public Finance Authority, 2017. Note: Numbers may not add due to rounding. Table C-3. Denver International Airport uses of funds before project substantial completion.

112 Evaluating and Implementing Airport Privatization and Public-Private Partnerships concession revenue and remit 80% to Denver International Airport. The developer could receive supplemental payments to make terminal improvements, thereby creating a contingency fund for Denver International Airport to make changes as needed. If the developer did not operate and maintain to specifications, Denver International Airport could make deductions from the terminal concessions revenue and supplemental payments due to the developer. Handback required the developer to transfer the project to Denver International Airport at no additional charge. The developer was required to perform and complete renewal work before the termi- nation of the agreement. If the developer did not comply, Denver International Airport could deduct the cost of completing the work from the termination amount. Termination of the Transaction In August 2019, the City of Denver terminated the Great Hall contract for convenience in light of mounting schedule delays and cost increases. Four months after construction started on the project, the schedule was delayed when the developer discovered substandard concrete in the existing terminal structure. Denver International Airport and the developer then engaged in a dispute resolution process over the course of 9 months until Denver International Airport decided that the combination of delays and increased costs were not compatible with its budget and intended goals. In total, Denver International Airport paid $183.6 million in termination payments to Great Hall Partners to terminate the contract and settle any outstanding claims, a figure that includes the return on investment over the 34-year term expected by Great Hall Partners. The city issued a $195 million contract to complete construction as a public project in February 2020, with the opening at least 3 years behind the original schedule. While risks in restarting the project may have an impact on the airport’s credit profile in the long term, the termination did not immedi- ately affect the airport’s bond ratings. Due to legal concerns, the parties involved were unable to speak to the research team regard- ing the termination. While the concrete issue was prominent in the information provided to the public regarding issues with the project, it was far from the only concern. From early in the project, there were problems with change orders on the owner’s side, delays in permitting, and issues around project sequencing. The following summary of the cause of the termination was developed utilizing information publicly reported, as well as off-the-record comments from a former Denver International Air- port staff member involved in the transaction. For this case study, the key issue is how much of the Great Hall failure was due to the P3 process versus issues that could have happened on any major infrastructure project. P3 Procurement Process: The selection process does not appear to be the primary source of challenges with the P3. According to a senior Denver International Airport staff member speaking after the termination, “This is was a good deal. It was a strong development agreement. That was not the problem.” Before the project development agreement, the airport brought on experienced professionals and consultants to develop the process and a risk matrix to evaluate the project. This is not to say the process did not have shortcomings, only that those could have been overcome if not for other issues. Contract Issues: During the lengthy negotiation process, a termsheet was agreed upon with GHP that included key business terms such as control, risk, revenue sharing, and payment structure. The airport chose the path of selecting a P3 partner before fully defining the project, with the idea of generating creative solutions to enhance the project. However, this may have also removed some negotiating leverage before reaching a final cost. Day said her team never

Case Studies 113 really knew what the true costs or the actual schedule would be. Within a year of beginning the project, Great Hall Partners was seeking nearly $300 million and 3 years more than planned to complete the project. Project Priorities and Control:2 The project was highly invasive to public areas traversed by passengers, and this created a dichotomy between what was best for the concessionaire and what was best for the airport users. As CEO Day said in an August 2019 press conference, “We are very far apart in terms of cost and schedule and our values—prioritizing safety, the passenger’s experiences, and our airline operations. This termination gives us control going forward.” Project Complexity:3 While complexity can be a key reason to select a P3, in the case of the Great Hall, it appears to have hindered success. In particular, the traditional permitting and inspection process was not compatible with the project. While Denver International Air- port did set aside a $120 million contingency in anticipation of unexpected issues, this proved inadequate to keep within budget. Project Management and Oversight: In taking responsibility for the P3 failure in March 2020, CEO Day cited several issues with Denver International Airport’s oversight. Covering statements that Day made to the city council, CBS News 4 reported issues that included Denver Inter- national Airport having no way to track the construction progress and airport management taking too long to make decisions (one example cited is a 14-month process to finalize a rest- room design). Furthermore, airport staff were not “technically knowledgeable” for such a com- plex project, and “decision-making authority was unclear.” Also, management was cited as too slow to react and hold Great Hall Partners accountable for issues. Intangible Factors:4 Issues of corporate culture were cited by a former Denver International Airport staff member familiar with the P3 as perhaps the most important factor in the P3 failure. According to Ms. Day, Great Hall Partners and Ferrovial based their cost estimates on low- quality materials that were not suitable for the airport and then had to be upgraded, increasing the costs of the project. For its part, the airport management team found it harder than antic- ipated to cede control over key aspects of its airport. The challenge here is that it is extremely difficult to include cultural issues as objective evaluation criteria in selecting a partner the airport will be working with for three decades. Gary/Chicago International Airport Management and Development Project 2https://news.stlpublicradio.org/post/here-s-what-st-louis-can-learn-denver-s-failed-airport-privatization-deal#stream/0 3https://www.kktv.com/content/news/DIA-Great-Hall-Project-should-resume-in-early-2020-540387041.html 4https://www.denverpost.com/2019/11/14/denver-airport-terminal-construction-oversight/ and https://denver.cbslocal.com/ 2020/02/23/kim-day-great-hall-project-fiasco-blame-denver-international-airport-dia/ Transaction Highlights • Because the development has not yielded a banner hotel project, Gary/Chicago International Airport and developer needed to manage expectations around financial performance and results. • A “bottom-up” community engagement strategy allows the transaction to not only be market driven, but also be transparent to the public. Source: Master Plan Visioning Charrette, 2014

114 Evaluating and Implementing Airport Privatization and Public-Private Partnerships Airport and Project Context Gary/Chicago International Airport is located approximately 30 miles from Chicago, Illinois, in Indiana’s Lake County. The airport’s primary service is cargo, charter, and general aviation services, though the airport has hosted commercial passenger flights in the past, most recently by Allegiant Air, which exited the market in 2013. Gary/Chicago International Airport has regional significance due to its proximity to the Chicagoland region, its international airports, and industrial and manufacturing economic clusters linked by highway and freight networks in the Midwest. The City of Gary, however, has struggled with a decline in population, low educational attainment, high unemployment, and depressed housing prices, as a result of both macroeconomic trends in the United States and the shifts in the manufacturing sector during the late 20th century that impacted the city’s tax base. When Mayor Karen Freeman-Wilson entered office in 2012, she initiated a series of economic development initiatives to stimulate growth in Gary, including exploring ways to expand com- mercial service at Gary/Chicago International Airport. In 2012, the City of Gary and Gary Airport Authority began considering ways to use the expansion of the airport’s runways as an economic development driver for the region. A study prepared in 2012 indicated that a proposed $174 million construction activity for runway extensions would “result in $277 million in economic value to the region and 1,040 annual jobs at the peak construction period.” The longer runway would better position Gary to attract larger general aviation and scheduled commercial aircraft. The report estimated that ongoing airport and business operations would result in 2,430 new jobs by 2025, a $527 million increase in regional economic output, and a $167 million increase in disposable household income (Steele, 2016, “Gary Airport Striving to Become ‘Economic Engine’”). The city and Gary Airport Authority convened an ad hoc committee in February 2013 to assess the benefits that a P3 arrangement could provide in stimulating economic development via the airport. The committee was composed of community members appointed by the mayor of Gary and three current Gary Airport Authority board members. The committee’s charge was to assess Gary/Chicago International Airport Procurement Timeline

Case Studies 115 the viability of implementing a P3 model, with an eye toward the investment, management, development, and job growth potential that a partnership with the private sector could yield. The committee identified the following “Key P3 Pillars” to guide the decision-making process: • Airport ownership remains with the Gary Airport Authority; • Robust job creation and economic development in the region; • Long-term, strategic community-regional partnership; • Ability and willingness to maximize capital investment dollars for the airport’s growth and development of property adjacent to the airport; and • Development of a sustainable Gary/Chicago International Airport—environmentally, econom- ically, and socially. According to the “Gary Airport Development Zone Allocation Area: Current Assessment and Future Outlook—September 22, 2014” report prepared by SB Friedman, “The City and Airport Authority entered into a P3 agreement to access private capital in order to facilitate improve- ments at the Airport and to position surrounding sites for development” (2014). Project Scope There were three components to the management and development project at the Gary/ Chicago International Airport: an owner-led expansion of the runway, a master plan agreement with a private developer, and a management contract with a private operator. The Gary Airport Authority’s and the city’s overall goal was to retain airport ownership while optimizing the revenue potential of the airport’s operations and the real estate surrounding the airport. The runway project extends the primary runway by 1,900 feet to a total of 8,900 feet in length. This expansion allows the airport to better compete for commercial airline service, which previ- ously was restricted on some missions by aircraft/airline runway operating standards, as well as make the airport more attractive for long-haul general aviation flights. The goals of the project are to “enhance operational safety and meet the needs of existing and future airport tenants by increasing airfield capacity as to the types and size of aircraft able to be served by the Airport.” The Gary Airport Authority also entered a master development agreement with Aviation Facilities Company (AFCO), contingent on the completion of the runway extension. The goals of the master agreement were to increase and diversify the tax base; increase employment opportunities, including for disadvantaged, minority, women and veteran owned business in the Northwest Indiana region; increase airport profit- ability; development of a sustainable airport in an environmentally economically and socially responsible form; and, encourage and attract investment in the Northwest Indiana region. The agreement granted AFCO the development rights to the development of property in the Gary Airport Development Zone (ADZ), a district surrounding the airport that allows the Gary Airport Authority to capture incremental growth in assessed property values (see Figure C-1). Initially established in 1993, the Gary ADZ is a 3,600-acre area surrounding the Gary/Chicago International Airport that contains a mix of industrial, commercial, and residential uses. The boundaries of the ADZ were progressively expanded until 2003 to encompass four tax increment allocations. Per the Gary ADZ assessment report prepared by SB Friedman on behalf of the Gary/ Chicago International Airport, 30.3% of the current net assessed value is generated by existing industrial uses, 8.8% by commercial uses, and 50.3% by residential uses. Approximately 10.6% of the assessed value in the ADZ is generated by vacant property, which makes up about 15% of the total acreage. Forty-eight percent of the land area in the Gary ADZ is tax-exempt, and about 1,000 acres were owned by the City of Gary. The Gary ADZ had an incremental assessed value of approximately $121 million that generated $7.6 million in tax increment revenues in 2013. The developer, AFCO, was responsible for presenting a master plan for the Gary ADZ within the first year of the agreement period. The master plan showed how the developer would invest

116 Evaluating and Implementing Airport Privatization and Public-Private Partnerships (either directly or by securing the commitments of other airlines and service providers) $100 mil- lion over the 40-year term. The management contract with AvPorts, which is owned by AFCO, covers all aspects of air- port management, including responsibility for FAA compliance. AvPorts is directly responsible to the Gary Airport Authority’s board. Project Procurement The ad hoc committee convened in February 2013 and determined the feasibility, goals, and next steps associated with a P3 procurement. The Gary Airport Authority issued a request for information (RFI) and RFQ in June 2013, followed by an RFP in July 2013. The airport received 10 responses to the RFP and selected two proponents to move forward: AFCO/AvPorts Manage- ment, LLC (with banking/equity support from Guggenheim and Loop Capital) and The GCIA Group (Airport Property Ventures, composed of NAI Hiffman, Clark Street Development, LCM Inc., Williams Capital Group, L.P.). Evaluation criteria for the preferred proponent included a review of developer qualifica- tions, such as business and financial capacity; the proposed approach to the development of a regional asset; management of airport operations; attraction of investment in regional assets; and approach to creativity and innovation. The ad hoc committee performed the evaluations Sources: Lake County Auditor from Cender, SB Friedman Figure C-1. Map of the Gary ADZ.

Case Studies 117 of proposals, which included both a scoring component and qualitative discussion. AFCO/ AvPorts entered exclusive negotiations with the City of Gary and the Gary Airport Authority in September 2013 (Gary/Chicago International Airport “Public-Private Partnership Com- mittee Enters Into Exclusive Negotiations with Firm to Invest in Airport and Surrounding Area,” October 25, 2013). The transaction closed in January 2014. Project Funding and Financing The developer may sell city-owned property within the zone to achieve a return on its invest- ment, but the City of Gary will share in 20% of net profits of city property contributed, sold, or leased for development. The private operator, AvPorts, will be paid a $120,000 fee per year for operating the airport in addition to operating expenses using the Gary Airport Authority’s current budget. The $174 million runway expansion was paid for publicly with $29.9 million in bonds backed by ADZ tax increment revenues, $111 million in PFCs provided from Chicago Midway and O’Hare Airports under the terms of a 1995 compact with the City of Chicago to jointly develop regional airport facilities. In addition, FAA AIP grants ($0.6 million), Northwest Indiana Regional Development Authority grants ($7.2 million), and state and federal transportation grants ($6.3 million) helped fund the project. When the project was completed, the Gary Airport Authority financed its additional capital projects using grant revenues, excess bond proceeds, and excess tax increment (Gary/Chicago International Airport Authority Airport Development Zone Revenue Bonds, Series 2014. December 1, 2014). The master agreement also is subject to performance-based requirements that, if not met, result in a reduction to the total 40-year term. The master developer was responsible for facilitating a $10 million commitment within the first year, or the term was to be reduced to 20 years. The developer also committed to facilitating a total $25 million investment by 2017, or the term was to be reduced to 10 years and the agreement could be terminated. These requirements were met by the airport facilitating the development of a $10 million investment of a fixed-base-operator (FBO) facility, the Gary Jet Center, which opened in 2017. The management agreement allows the private operator to share in 15% of airport profits and an additional 5% of airport profits if it satisfies the requirements for disadvantaged business enterprise, minority business enterprise, women’s business enterprise, and/or veteran’s business enterprise (DBE/MBE/WBE/VBE) and local participation requirements. AvPorts optimized air- port operations in the first 2 years of management, has worked to enhance revenues with existing users and new entrants during years 1 to 5, and is aiming to be profitable within 10 years. LaGuardia Airport, Central Terminal Building Replacement Project Transaction Highlights • The Port Authority of New York and New Jersey (PANYNJ) addressed congestion constraints and met operations goals because the P3 model transferred those risks. • Owners and developers must be aware of the effects that political and market climate can have on the procurement timeline. • Performance-based requirements and open-ended evaluation criteria gave developers the opportunity to be innovative. Source: The Walsh Group

118 Evaluating and Implementing Airport Privatization and Public-Private Partnerships Airport and Project Context LaGuardia Airport is the closest airport to Manhattan and served over 14.5 million enplaned passengers in 2017. Per data from PANYNJ, LaGuardia caters heavily to origin-destination traffic—in 2017 about 86% of passengers—and to business travelers, with the highest percentage of the three major airports in the New York area. Before the project, LaGuardia had four terminals: Terminal A, with six gates served by JetBlue; the Central Terminal Building (also known as Terminal B), with 35 gates serving eight airlines and half of all LaGuardia air traffic; Terminal C, with 21 gates served by Delta, Frontier, and Spirit; and Terminal D, with 10 gates served by Delta and WestJet [New York Transportation Devel- opment Corporation Special Facilities Bonds, Series 2016A (Tax-Exempt) (AMT) (LaGuardia Airport Terminal B Redevelopment Project), 2016]. Following the project and redevelopment of Terminal C and D into one terminal by Delta Airlines, there will be two main terminals— Terminal B serving four airlines (America, Air Canada, Southwest, and United), JetBlue in Terminal A (formerly known as the Marine Air Terminal), and the remaining airlines (Delta, Frontier, Spirit, and WestJet) in the new Delta-constructed terminal (LaGuardia Airport official website). LaGuardia Airport is operationally constrained by space, sitting on just 680 acres surrounded by water and the Grand Central Parkway and also by the airport’s perimeter rule that limits most flights to fewer than 1,500 miles. LaGuardia is owned and operated by PANYNJ, which oversees much of the region’s major transportation infrastructure, including bridges, tunnels, and buildings, in addition to five air- ports. PANYNJ’s prior success with P3s, notably John F. Kennedy International Airport Terminal 1 and the Goethals Bridge replacement, completed in 2018, created momentum for the P3 delivery model. The LaGuardia passenger experience has deteriorated and is not competitive with other air- ports. The airport was famously likened to a “third-world country” airport in February 2014 by LaGuardia International Airport Procurement Timeline

Case Studies 119 Vice President Joe Biden due to its inadequate facilities that reflect underinvestment. Results of an international passenger survey by Skytrax found LaGuardia did not place on the top 100 list for customer satisfaction in 2018; meanwhile, John F. Kennedy International Airport ranked 69th (“World’s Top 100 Airports 2018,” n.d.). Terminal B is a four-story central building with four concourses and two wings. The ter- minal was outdated, inefficient, and past its useful service life. The interior terminal layout was designed before the attacks of September 11, 2001, which now creates spatial constraints, requires a separate TSA checkpoint for each concourse, and has only 10% of its concessions beyond security. Additionally, Terminal B’s taxiway configuration creates frequent bottlenecks that result in aircraft delays. Project Scope The Terminal B P3 project includes the following elements: major Terminal B reconstruction, construction of a new arrivals/departures Central Hall connecting Terminals B and a redeveloped Terminal C, additional airside infrastructure (ramp construction, new aircraft fueling facility, etc.), and landside improvements (e.g., west parking garage, new pedestrian walkway, new central heating and refrigeration plant, and public road improvements). Beyond the P3, PANYNJ will fund and perform the LGA Capital Infrastructure Renewal Program, which includes the main- tenance of utility infrastructure, parking, roadways, and related projects (PANYNJ, 2013). The project scope required that construction not reduce the number of operational gates at any point. Figure C-2 shows a diagram of the components of the redevelopment. Using the design, build, finance, operate, and maintain (DBFOM) model, the private oper- ator will have a lease to operate Terminal B through 2050. The private operator’s responsibilities include (1) assume operation of the existing Terminal B from the Port Authority, (2) undertake the construction project, (3) partially finance the construction, (4) transition from the old terminal to the new terminal, and (5) operate and maintain the new Terminal B. The first 11 gates within Terminal B opened in December 2018 (Martin, 2018). This will be followed by an additional seven gates and two pedestrian bridges over active taxiways (the first Source: LaGuardia Gateway Partners, Management Proposal for LaGuardia Airport CTB Replacement Project, May 2014. Figure C-2. LaGuardia Gateway Partners proposed work segments.

120 Evaluating and Implementing Airport Privatization and Public-Private Partnerships such bridges in the world) opening in 2020 (Barone and Cook, 2019). The target completion date of the entire Terminal B facility is 2022. Project Funding and Financing At financial close in June 2016, the Terminal B project was expected to cost $3.91B, of which $2.8B would be privately funded, representing the largest P3 transaction in the United States at the time (Barone and Cook, 2019). The $1.2B cost of the new Central Hall will be entirely funded through PANYNJ, while the funding sources for the $3.9B Terminal B project are shown in Table C-4. The “Other” category includes reinvested operating revenues and interest earnings during construction. The $2.8B private financing consists of $2.4B issued through private activity bonds, $234M collected through the issuance premium, and $200M invested as equity by the private entity’s equity constituents. The conduit issuer New York Transportation Development Corporation issued the bonds, of which $150M is taxable (“LaGuardia Airport Central Terminal B Redevel- opment,” n.d.). These bonds were 10 times oversubscribed, including potential buyers in the United States and foreign investors, demonstrating the level of investor confidence in the debt (“Case Study: Why Investors Queued-Up to Finance LaGuardia,” 2016). Moody’s rated the airport develop- ment bonds Baa3, corresponding to a lower medium investment grade. Moody’s attributed this rating to the following: 1. High level of air traffic demand within a constrained market that can support the redevelop- ment costs; 2. Experienced construction joint venture: Skanska has worked extensively with New York City and PANYNJ on billion-dollar projects and Walsh on P3s and airport deliveries; and 3. Construction risk makes the project “among the most complex” Moody’s has rated and though developer LaGuardia Gateway Partners has creatively minimized construction staging, there is a risk of schedule delays due to construction occurring around a fully opera- tional facility. Moody’s attributed this complexity to “surrounding space constraints, the maintenance of an operational facility throughout construction, challenging geotechnical conditions, and envi- ronmental contamination” (“Public-Private Partnerships: Fast Tracking Infrastructure with Innovation,” 2017). Funding Source Amount Series 2016 Bonds Principal $2,410M Original Issuance Premium* $234M Equity $200M Port Authority Funding (PFCs) $1,000M Other $69.2M *These bonds were issued at a premium to the public due to prevailing market rates, therefore acting as an additional funding source for LaGuardia Gateway Partners. Source: New York Transportation Development Corporation Special Facilities Bonds, Series 2016A (Tax-Exempt) (AMT) (LaGuardia Airport Terminal B Redevelopment Project), 2016, p. 63. Table C-4. Funding sources for LaGuardia Terminal B redevelopment project.

Case Studies 121 Project Procurement LaGuardia’s procurement process took about 3.5 years from RFQ issuance to financial close, in June 2016, due to project scope complexity, evolving bidding requirements, and political interference. Instead of requesting the private entity to provide an upfront payment to lease the terminal, PANYNJ indicated in its RFQ that it required (1) a $200M equity investment, (2) annual ground rent payment, and (3) a portion of the new terminal’s net revenues. In December 2011, PANYNJ issued an RFI for an entity to design, build, operate, finance, and maintain Terminal B, seeking private partners to “deliver the project faster, while trans- ferring risk to the private sector, and lowering costs” (Port Authority of New York and New Jersey, 2012). After receiving 15 responses to the RFI in February 2012, half of which had an international presence, the RFQ was issued in October 2012; five consortia submitted statements of qualifications in January 2013. Of these, four groups prequalified; ADC & HAS Airports Worldwide dropped out. The RFP for the Terminal B redevelopment was issued to the four prequalified consortia on August 13, 2013, with PANYNJ announcing plans to select a preferred proposer in July 2014. One month before the submission deadline of April 2014, Aerostar New York Holdings left the bidding process when the equity team’s airport operator, ASUR, was disqualified. The remaining three teams responded to the RFP in May 2014, submitting financial and technical proposals. The preferred proposer was scheduled for selection in October 2014. However, before this could take place, New York Governor Andrew Cuomo sought to expand the scope of LaGuardia Airport redevelopment beyond the Central Terminal and announced a masterplan redesign competition (described below). This began a chain of further delays for the bidders: PANYNJ indicated its decision would be made in late November 2014, then February, then April 2015, before finally announcing LaGuardia Gateway Partners as the preferred proposer in late May 2015. In June 2016, financial close and groundbreaking occurred, with Governor Cuomo and Vice President Biden in attendance. Due to the political intervention, the preferred proponent was not selected until May 2015, 2.5 years after the original RFQ was issued in October 2012. LaGuardia Gateway Partners Selection The LaGuardia Gateway Partners team was led by Vantage Airport Group, Meridiam Infra- structure, and Skanska, each of whom initially had a 33% equity stake (“Governor Cuomo Announces Financial Closing on Transformational Redevelopment of LaGuardia Airport,” 2016). PANYNJ selected LaGuardia Gateway Partners as the preferred proponent in May 2015, indicating that LaGuardia Gateway Partners’ proposal aligned closely with the recommendations from the airport advisory panel. After awarding LaGuardia Gateway Partners the redevelopment project, PANYNJ pro- vided two sets of stipends: first, $2M to each of the consortia that submitted “fully compliant proposals” (LaGuardia Gateway Partners and LaGuardia Central Terminal Consortium); and, second, in case the procurement was cancelled at a later stage, an additional $3M to LaGuardia Gateway Partners (“A 21st Century Airport for the State of New York: The New LaGuardia,” 2015). In March 2016, PANYNJ’s Board of Commissioners planned to vote to execute the lease with LGP ahead of the June financial close. At this point, there was concern among the com- missioners for two reasons: first, the power that LaGuardia’s transaction gives to PANYNJ’s

122 Evaluating and Implementing Airport Privatization and Public-Private Partnerships “executive director and subcommittee, instead of to the board,” and second, the risk that LaGuardia would have cost and scope overruns similar to those seen at the World Trade Center (Porter, 2016). These concerns were overcome, and financial close was reached on June 1, 2016. Los Angeles International Airport Automated People Mover Transaction Highlights • P3 procurement process allowed Los Angeles World Airports to bring in automated people mover experts, which they did not have prior knowledge in. • Los Angeles World Airports allowed for alternative technical concepts, which helped proposers exceed the evaluation criteria. • P3 can be successful even through changes in leadership—but it takes work. • Los Angeles World Airports used the RFP scoring and non-compliance point system to meet MBE/WBE goals. Airport and Project Context With over 41 million enplaned passengers in 2017, Los Angeles International Airport is the second most utilized airport in the United States, and fifth in the world. The airport covers a total of 3,500 acres of land and has four parallel runways, nine passenger terminals, and 2 million square feet of cargo facilities. Los Angeles International Airport is managed and owned by Los Angeles World Airports. Los Angeles World Airports, formerly known as the Department of Airports, is an agency of the Los Angeles government. Los Angeles International Airport is the largest origin-destination airport in the United States, with nearly 70 million passengers beginning or ending their journey at the airport. Accessed via city streets, the airport experiences substantial landside traffic congestion on city roads to access the airport and in the central terminal area (CTA). Los Angeles World Airports created the Landside Access Modernization Program to address challenges in accessing the airport and alleviate some of the congestion. The Landside Access Modernization Program consists of two major elements: an automated people mover Landside Access Modernization Program system to connect the CTA with parking, the Los Angeles Metro Crenshaw/Los Angeles International Airport Line rail, currently under construction and scheduled to open in 2020, and a new consolidated rent-a-car (ConRAC) facility. Both the automated people mover and ConRAC components of the Landside Access Modernization Program are being delivered via two separate DBFOM processes. The automated people mover project, which is the primary focus of this case study, reached financial close in June 2018, and construction was set to begin in 2019. The ConRAC project reached financial close in December 2018. The 5.3 million-square-foot customer service facility will be located adjacent to the Interstate 405 freeway and contain 6,600 ready/return parking stalls, 10,000 idle vehicle storage, 1,100 rental car employee parking spaces, and over 2,500 parking spaces for Los Angeles World Airports employees. The decision to utilize P3 for the Landside Access Modernization Program resulted from weighing the project goals, potential benefits, and potential costs that came with alternative delivery. The private financing component of the deal drove the kind of innovation that Los Angeles World Airports was seeking for complex facilities with which it had no prior experience.

Case Studies 123 Los Angeles World Airports valued the ability to partner with the private sector’s innovation and expertise while sharing risks and financial responsibilities. The DBFOM method also aligns design, construction, and operation, while emphasizing the high quality and timeliness of the delivery. The decision to use a P3 procurement goes beyond risk transfer benefits as well. Los Angeles World Airports considered the project management and technical capacity of the organization, ultimately deciding on P3 in part due to the following: • Los Angeles World Airports had no prior experience with automated people movers or ConRAC; • Los Angeles World Airports is unlikely to develop either type of system in the future, meaning there is little institutional knowledge to gain from one-off projects; • Limitations on management capacity with several major terminal projects were happening in the same timeframe; • Lifecycle cost certainty was important since Los Angeles World Airports did not have experi- ence operating automated people mover or ConRAC facilities; and • Improved speed of delivery was a key factor as Los Angeles was in pursuit of the summer Olympic Games. To help ensure progress, the airport CEO can authorize change orders up to $5M. Los Angeles International Airport Automated People Mover Procurement Timeline Project Scope The objective of the automated people mover program is to help alleviate airport conges- tion and improve the passenger experience. The automated people mover will run through the center of the terminal complex, which itself is undergoing major redevelopment during the same timeframe as the automated people mover project. Los Angeles World Airports’ architect insisted on a consistent architectural look and made sure that bidders were designing their proposals from the same architectural guidelines. The automated people mover will run on an elevated, 2.25-mile track with six stations that will connect the terminal to public and private transportation and the new ConRAC facility. Traveling at 47 miles per hour approximately every 2 minutes, the automated people mover is designed to help reduce traffic congestion surrounding the airport. The ride time from the CTA

124 Evaluating and Implementing Airport Privatization and Public-Private Partnerships to the ConRAC will be roughly 10 minutes. Each train will hold approximately 200 passengers, for a ridership capacity of 10,000 passengers per hour. Project Procurement Los Angeles World Airports publicly announced that it was considering a P3 for the auto- mated people mover project in August of 2015 (Barragan, 2015). In June 2016, Los Angeles World Airports issued the RFQ for the DBFOM delivery model for the automated people mover project. Five teams were then scored and shortlisted for the project. Due to the limited number of automated people mover developers known to be able to meet the minimum criteria, Los Angeles World Airports qualified constructors and the automated people mover system separately, then let them combine into consortia for the RFP. The five teams were issued the RFP on July 27, 2017. The RFPs were returned by three bidders in December 2017, and the board began evaluating and scoring the proposals in January 2018. The technical and financial proposals were evaluated independently. The technical proposal was weighed at 60% of the overall score and was composed of three components: technical merit, visual appeal, and user experience. The financial proposal provided the remaining 40% of the potential points. Technical Merit The automated people mover system portion evaluated the automated people mover oper- ating system’s technology and equipment components. The RFP instructions to proposers requested a comprehensive, well-reasoned approach to the design and construction manage- ment. The approach to the maintenance of traffic/mitigation of construction impacts evaluated bidders’ understanding of the nuances and complexities both on site and off site and the com- mitment to managing the traffic of both areas. The inclusivity portion of the evaluation helped to ensure local hiring and involvement in the development. Visual Appeal Visual appeal was broken down further into two categories: the architectural appeal of the automated people mover fixed facilities, focusing on the overall architectural vision and design; and vehicle aesthetics, focusing on the interior and exterior stylings of the automated people mover vehicles. Los Angeles World Airports valued the cohesive appearance of the automated people mover system with the rest of the airport and required that the architecture be pre- approved for each team before submittal of the final proposal. User Experience Los Angeles International Airport wanted to ensure that the user experience would be preserved during the design and build phase and the operation and maintenance phase. The design and build phase required a mitigation plan to compact the temporary loss of parking during con- struction and reduce any project-related traffic impacts and inconveniences to the public in a communicated and discrete manner. During the operation and maintenance phase, Los Angeles World Airports asked bidders to offer precise, detailed, and credible commitments to enhance the user experience for the vehicles, stations, and/or pedestrian walkways including commit- ments to improve user comfort and disabled access, increase ease of use, and provide technology and media enhancements. The criteria were weighted as per Table C-5. The financial proposal was weighted at 40%. Table C-6 shows each bidding team’s total price proposal.

Case Studies 125 LAX Integrated Express Solutions was announced as the preferred proponent on January 24, 2018. LAX Integrated Express Solutions earned the highest technical score and had the lowest project cost of the three teams that proposed. LAX Integrated Express Solutions scored highest in all major technical scoring and evaluation categories: technical merit, visual appeal, and user experience. Los Angeles World Airports paid both losing submitters $2 million stipends for their efforts and the rights to own the ideas proposed in their bids. Two alternative technical concepts from losing teams were incorporated into the project’s final design. On June 8, 2018, Los Angeles World Airports reached financial close and entered a 30-year DBFOM agreement with LAX Integrated Express Solutions. Per the agreement, LAX Integrated Category Evaluation Criteria Points Awarded Technical Merit Automated People Mover System 700 Approach to Operations & Maintenance 700 Inclusivity 600 Approach to Execution of Project Construction 500 Approach to Maintenance of Traffic/Mitigation of Construction Impacts 500 Project Safety & Security 500 Sustainability 300 Public Outreach/Stakeholder Communication 200 Technical Merit Total 4,000 Visual Appeal Architectural Appeal of the Automated People Mover Fixed Facilities 750 Vehicle Aesthetics 250 Visual Appeal Total 1,000 User Experience Total 1,000 Total Points 6,000 Source: Los Angeles World Airports, 2018a. Table C-5. Los Angeles World Airports weighting criteria for automated people movers. LAX Integrated Express Solutions GATEWAY LAXCA Proposed Net Present Value (NPV) $2.63B $3.41B $3.11B Total 1st Year Availability Payment $97.1M $127.0M $115.1M Design and Construction Cost as Presented in Original Bids $1.95 $2.16B $2.37B Total Bid Over Life of Agreement $4.46B $5.77B $5.07B Source: Los Angeles World Airports, 2018a. Table C-6. Los Angeles International Airport automated people mover price competition.

126 Evaluating and Implementing Airport Privatization and Public-Private Partnerships Express Solutions will spend the first 5 years of the contract in the design and construction phase and the last 25 years operating and maintaining the automated people mover. At the close of the agreement, the automated people mover system must have at least 5 years of remaining useful life. Project Funding and Financing The agreement value includes three components: construction costs; 25 years of opera- tion and maintenance costs; and the construction financing cost. LAX Integrated Express Solutions will receive six milestone payments during construction for a total of $1.95 billion for services in the design and construction phase. During the operation and maintenance phase, LAX Integrated Express Solutions will receive annual availability payments disbursed in monthly increments. The first availability payment is $97.1 million. The project debt includes a mix of approximately $263 million short-term bank facility and $1.2 billion of fixed-rate senior private activity bonds. The short-term debt is expected to be fully repaid with the completion milestone payment and equity. The remaining $1.2 billion of long-term availability private activity bonds will be fully repaid over the 25-year operation and maintenance phase. Fitch Ratings assigned a bond rating of BBB+ on LAX Integrated Express Solutions bonds. Though they scored lower than a typical BBB+ project, Los Angeles World Airports was able to offset the coverage by guarantees from strong counterparties covering nearly all costs, should they exceed the budget. Los Angeles World Airports’ milestone pay- ments are funded by a mix of subordinated Los Angeles World Airports debt (A-rated by Fitch), airport revenues, PFCs, and rental car customer facility charges (which help fund the portion of the automated people mover connecting to the ConRAC). Project Risks Key project risks elements included the following: • Unforeseen conditions: geotechnical and utilities were not fully mapped before the procurement. • Completion risk is mitigated by the lump-sum, fixed-price contract and back-to-back agreement. • Cost risk. Los Angeles World Airports retained a 7% ($145.7 million) owner’s contingency to mitigate project risk. • Environmental risk existed as the National Environmental Policy Act and California Environ- mental Quality Act approval process was running concurrently with the automated people mover procurement. • The project has a significant impact on the surrounding area, including the residential areas of Westchester and the City of El Segundo. Everett Paine Field, Snohomish County Airport Transaction Highlights • Environmental processes define the project scope and thus constrain the potential scope of a P3. • Procurement delays caused by lack of community buy-in, which can be avoided through early stakeholder engagement. • Project elements that require specialized expertise beyond the owner’s core public mission are well suited for P3. • As of February 2020, the airport was served by two airlines with service to 11 western U.S. destinations. Photo used with permission of Propeller Airports.

Case Studies 127 Airport and Project Context Everett Paine Field (Snohomish County Airport) is owned and operated by Snohomish County, Washington. Everett Paine Field was constructed in 1936 and serves as the main manufacturing center for Boeing widebody aircraft and the repair and maintenance servicing center for Aviation Technical Services, a third-party aircraft inspection and repair company that services airlines such as Alaska Airlines, American Airlines, Southwest Airlines, and UPS. Boeing manufactures the 747, 767, 777, and 787 aircraft at Everett Paine Field. Everett Paine Field was initially constructed as an airport for commercial aeronautical work. In the 1970s, the Snohomish County Planning Commission formally adopted limited air service use at Everett Paine Field (Camp, 2007). Over time, the surrounding community’s population increased, the local economy diversified, the aviation industry changed due to technological innovations, and the economic downturn of the early 21st century prompted the county to re-examine the limited purpose and use of Everett Paine Field. In 2002, the county began exploring regional air service options. By 2008, Allegiant Air and Horizon Air indicated an interest in commencing passenger service, but the county council opposed commercial air service (Cooper, Sullivan, and Gossett, 2008, “Letter to Robert Ashcroft, Allegiant Air”). Several months later, the FAA concluded that the county could not prohibit commercial service if the airport was a recipient of FAA grants (Sheets, 2008). The county then began the environmental assessment (EA) process to determine the impacts of commercial air service and received a Finding of No Significant Impact and Record of Decision (FONSI/ROD) in 2012 (Snohomish County Planning and Development Services, n.d.). However, Allegiant Air rejected the county’s operations terms in 2013. When the county began negotiations with the existing private partner in 2014, the airport’s master plan, approved by the FAA, indicated that commercial air passenger service remained a critical goal (Paine Field, 2012). Project Scope Propeller Airports, under a non-competitive ground lease agreement with the county, pro- posed to design, build, finance, operate, and maintain a new terminal for passenger service and associated parking on a developed site currently occupied by existing aviation support Everett Paine Field Procurement Timeline

128 Evaluating and Implementing Airport Privatization and Public-Private Partnerships functions. The new terminal would connect the existing terminal building and the control tower and would feature approximately 30,000 square feet of interior space to accommodate check-in, TSA security screening, passenger lounge needs, boarding, concessions, and baggage handling and claims. Existing parking areas would be reconfigured into new parking facility areas to support the proposed new passenger terminal, including four surface lots with 600 parking spaces [“Paine Field Passenger Terminal (Propeller),” n.d.]. The final two-gate terminal can serve 24 daily domestic arrivals and departures (“Draft Supplemental Environ- mental Assessment for Amendment to the Operations Specifications for Air Carrier Operations and Amendment to a Part 139 Airport Operating Certificate—Snohomish County Airport/ Paine Field: Everett, Washington,” September 2018). Project Procurement In June 2014, Propeller Airports (a subsidiary of Propeller Investments), began discussions with Snohomish County to construct a terminal and parking facility at Everett Paine Field. In February 2015, the airport executive board submitted to the county council an Executive/ Council Approval Form, recommending the approval of an option-to-lease agreement. In March 2015, the county authorized the execution of an option to lease. In June 2017, the county and Propeller Airports signed a 30-year lease agreement with two 10-year extensions for a potential 50-year concession period [“Paine Field Passenger Terminal (Propeller),” n.d.]. Alaska Airlines, United Airlines, and Southwest Airlines committed to initiating service at Paine Field when the terminal opened in early 2019 with destinations to 10 cities—though Southwest later cancelled its service plan (“Questions, Answers About Commercial Air Service at Paine Field” n.d.). Implementation was dependent on the findings of a supplemental envi- ronmental review process. The EA, prepared in 2012, reviewed a proposed amendment to the airport’s Part 139 operating certificate to authorize scheduled commercial air service operations. A supplemental EA was prepared related to Propeller’s plan to construct a greenfield terminal building that would introduce new service by different airlines, aircraft, and operational levels than those analyzed in the previous EA. A finding of no significant impact for the project was issued in September 2018. Commercial service at Everett Paine Field was politically controversial due to the relationship of the airport to the surrounding community. Initial public opposition focused on the noise produced through increased air traffic. Community members questioned whether expanding commercial air service was not in the spirit of the original intent of the airport. However, the FAA’s determination that the county was obligated to allow commercial service due to its grant obligations opened the door to a sole-source relationship with a private operator. No bidding process was necessary since Propeller came to the airport with the concept and was granted only a land lease, not an exclusive concession. Project Funding and Financing Under the terms of the long-term lease, Propeller is responsible for financing the construc- tion of a two-gate, 29,300 square foot terminal costing approximately $40 million. Propeller sold $50 million in bonds in February 2018 via the Washington Economic Development Finance Authority to fund the project. Propeller will make annual rental payments to the county, which will receive a share of gross annual terminal revenues. The first-year rent charges for the lease are $0.4 million, with annual rental increases. Estimated rent payments total more than $25 million over the term of the agreement. In addition, the county will receive a 2.5% share of annual terminal revenues for the lease’s first 4 years, with a 5% share each year thereafter (Kamb, 2015).

Case Studies 129 Luis Muñoz Marín International Airport, Commercial Facilities Transaction Highlights • Bringing together the airlines, owner, and operator in an memorandum of understanding (MOU) was complex, but necessary to complete the project. • A private operator was able to assume duties that generated new and needed revenues. • The owner had a strong relationship with the FAA, resulting in transparent and regular conversation needed to expedite the project. Airport and Project Context Luis Muñoz Marín International Airport is located 3 miles from San Juan and is the busiest airport in the Caribbean with over 4.2 million enplaned passengers in 2017. The airport has a main terminal composed of four concourses and a connected smaller terminal with one concourse. The airport is served by 24 commercial airlines. When Luis Muñoz Marín International Airport applied to the FAA Privatization Pilot Program in 2009, the Puerto Rican economy was amid the financial distress that would lead the island to default on constitutionally guaranteed general obligation bonds in 2016. At the same time, Luis Muñoz Marín International Airport’s owner and operator, the Puerto Rico Port Authority, was experiencing revenue shortfalls and was heavily in debt, resulting in a downgrade of its credit rating from Aaa to Baa3 between 2007 and 2009 (“Luis Muñoz Marín International Airport (SJU)—Public-Private Partnership Project: December 2011,” n.d.). The Puerto Rico Public-Private Partnerships Authority noted serious challenges at Luis Muñoz Marín Inter national Airport in a 2011 report. These included deteriorating infrastructure, the decline in traffic after American Airlines closed its hub, lack of financial capacity and invest- ment, managerial continuity with frequent leadership changes, and strong competition from neighboring countries. Luis Muñoz Marín International Airport, Commercial Facilities Procurement Timeline Source: aeropuertosju.com

130 Evaluating and Implementing Airport Privatization and Public-Private Partnerships The purpose of pursuing a P3 for Luis Muñoz Marín International Airport was to accom- plish three main objectives: restore the facility’s infrastructure conditions and performance, strengthen Puerto Rico’s economic growth, and re-establish the financial stability of Puerto Rico’s Port Authority. In February 2013, the FAA approved the 40-year lease of Luis Muñoz Marín International Airport to a private operator, Aerostar Airport Holdings, Inc. Project Procurement After acceptance into the AIPP, the Port Authority immediately began engaging with stake- holders and the community. The airlines were one of the first groups that were engaged, with the expectation that the project would receive a significant pushback. Luis Muñoz Marín Inter- national Airport made sure that it would focus on the task of depoliticizing and stabilizing the airport. To the surprise of the Port Authority, the airlines were supportive and embraced the opportunity to improve the airport’s revenue streams and deteriorating conditions, and an MOU with the airlines fixed airline payments at $62 million over the first 5 years of the conces- sion and rising at no more than the rate of inflation afterward. With the airlines in support, the Puerto Rico Public-Private Partnerships Authority, as the procurement agency, moved forward with the RFQ process. The RFQ for the operation, manage- ment, development, and rehabilitation of Puerto Rico Public-Private Partnerships Authority was released in June 2011 with its due date set in August 2011. The P3 Authority was able to mobi- lize quickly through procurement because of a pre-established procurement process. Twelve teams responded to the RFQ and were evaluated based on compliance, technical, and financial capabilities. After a 1-month review, the P3 Authority and the Port Authority created a shortlist of six qualified teams. After issuance of the RFQ, Puerto Rico Public-Private Partnerships Authority hired a finan- cial advisor and a legal advisor. The shortlisted, prequalified bidders were required to sign a confidentiality agreement before being issued the RFP in October 2011. In addition to the gen- eral proposal requirements, bidders were required to submit a supplemental financing plan, an operation plan, an airport growth evaluation plan, and a leaseholder upfront fee offer. The proposals were evaluated on a pass/fail basis. Aerostar Airport Holdings, Inc., was awarded the lease to Puerto Rico Public-Private Partner- ships Authority in July 2012 and reached financial close in January 2013. Following the financial close, the FAA approved the concession agreement in February 2013. The three-phased conces- sion agreement is 40 years and grants Aerostar the right to operate, manage, maintain, develop, and rehabilitate the airport. The lease agreement required certain capital investments by Aerostar. These include specified projects required in the first 18 months of operations, as well as 22 more projects required over the life of the concession. These range from basic maintenance, such as repairing all terminal roof leaks and upgrading bathrooms, to construction projects such as a new access road and utilities for the south general aviation and reconstructing a taxiway. FAA AIP funds and PFCs were utilized for a portion of these projects. According to the FAA Record of Decision (FAA, 2013), Aerostar committed to $240 million in capital expenditures, including $34 million for airline-required projects, in the first 3 years. Over the concession, Aerostar estimated $1.4 billion in total capital expenditures. Post Transaction At the financial close of the project, Grupo Aeroportuario del Sureste (ASUR) and Highstar Capital IV shared the $163.5 million equity 50/50. Highstar Capital was subsequently acquired

Case Studies 131 by Oaktree Capital Management in 2014. In May 2017, Oaktree sold its share of Aerostar Airport Holdings, with ASUR increasing its stake by 10% and AviAlliance purchasing the remaining 40%. The transaction received all regulatory approvals and Aerostar continues to operate Luis Muñoz Marín International Airport. The devastation caused by Hurricane Maria in September 2017 severely impacted the Caribbean region. Puerto Rico experienced massive destruction in its transportation, power, and water infrastructure. Luis Muñoz Marín International Airport closed during the passing of the storm and continued limited operations days later with a focus on evacuating stranded pas- sengers. The airport relied on 21 generators to supply power to the facility. Only one food and beverage concession operated during that time. In the days following the storm, passenger traffic decreased from 15,000 passengers departing daily, before the storm, to approximately 2,000, despite standby lists in the tens of thousands. In December 2017, Luis Muñoz Marín International Airport passenger traffic improved, but was still down 23% compared to the previous year. In response to the devastation caused by Hurricane Maria, rating agencies reviewed the possibility of a medium-term change in the assess- ment of Aerostar’s performance due to changes in air travel to and from Puerto Rico. Passenger volume appears to be recovering, with passengers down 7.3% through September 2018 compared to the first 9 months of 2017. While financial information regarding Luis Muñoz Marín International Airport was incom- plete before the transaction and should be utilized with caution, key financial metrics appear to have improved dramatically between 2013 (the first partial year of private management) and 2017. As shown in Table C-7, while passenger volume rose less than 5%, non-aeronautical revenue such as food, retail, and parking more than doubled while costs decreased nearly 20% on a per enplaned passenger (EPAX) basis. Project Funding and Financing The 40-year lease agreement included an upfront payment of $615 million to the Port Authority, which was financed primarily through $350 million in investment-grade bonds and $265 million in private equity (Deery, 2013). The lease agreement also included a revenue-sharing mechanism. For the first 5 years, the developer will pay an annual concession payment of $2.5 million. The concession payment for the next 25 years is equal to 5% of the gross airport revenues, followed by 10% of the gross air- port revenues for the final 10 years of the concession term. The total project capital costs were estimated at $2.6 billion in 2013 (Richards, 2014). Metric 2013 2017 Change Enplaned Passengers (EPAX) 4,103,197 4,299,498 4.8% Airline CPE $12.75 $14.42 13.1% Non-Aeronautical Revenue $21,629,251 $48,971,859 126.4% Non-Aero Revenue per EPAX $5.27 $11.39 116.1% Operating Expense (OpEx) $69,466,099 $58,641,321 −15.6% OpEx per EPAX $16.93 $13.64 −19.4% Source: FAA Financial Report 127 and FAA Passenger and All Cargo data, analysis by WSP. Table C-7. Key metrics comparison for Luis Muñoz Marín International Airport.

132 Evaluating and Implementing Airport Privatization and Public-Private Partnerships Per the concession agreement, Aerostar is given primary operating control of the airport and its revenue. Under the agreement, Aerostar assumes full responsibility for the airport’s manage- ment and operation; including any expenses incurred. The agreement prevents the developer from transferring its interest in the airport. Changes in ownership control of the lease are not allowed unless a proposed transfer is approved by Puerto Rico’s government and airlines oper- ating at the airport as stipulated in the lease agreement’s termination provisions. The lease contract included specific performance criteria that required the operator to keep the airport in a state of good repair so that after the transfer of the facility at the end of the 40-year period, the Puerto Rico government would receive a facility maintained with industry standards. Thirty days before the effective end date of the lease, the developer should provide the owner with a written transition plan. The fees and charges in effect will be reset and adjusted depending on the condition of the airport’s release. Stewart International Airport, Privatization Transaction Highlights • The length of the contract term should be long enough to secure financing and short enough to completely transfer control. • Include a draft contract as part of the RFP to avoid agreement delays. • Project owners should provide as much information to proposers as possible. Airport and Project Context New York’s Stewart International Airport is located in New Windsor, New York approxi- mately 70 miles north of Midtown Manhattan. Stewart International Airport is a former U.S. Air Force base, acquired by the New York State Department of Transportation (NYSDOT) in 1982. NYSDOT operated the airport with the assistance of contractors until 2000 when Stewart became the first commercial service airport privatized under the Airport Privatization Pilot Program (APPP) (New York Department of Transportation, 2000). NYSDOT leased Stewart International Airport to SWF Airport Acquisition, Inc., a subsidiary of the National Express Group, for a period of 99 years. In 2007, PANYNJ purchased SWF Airport Acquisition’s stake in the lease. When Stewart International Airport was acquired by NYSDOT, state legislators envisioned it as the fourth major airport for the New York City metropolitan region. That vision never materialized. Commercial air service grew slowly, but it never seemed to fully achieve its role as an economic development catalyst. Moreover, as an aviation facility, Stewart International Airport was not truly core to NYSDOT, which focused its mission on surface transportation. In 1994, New York’s newly elected governor, George Pataki, included privatization as a promise in his economic platform. Governor Pataki pledged to make New York State a leader in public asset operation and privatization (Ernico et al., 2012). The goals were to turn “the airport over to the private sector and provide the Hudson Valley region with better air service, greater economic development, and a strengthened tax base”(Ernico et al., 2012, p. 95). NYSDOT’s goals, then, were to maximize the airport’s revenue potential and develop real estate to stimulate economic development in the region. To seek a P3 developer, Governor Pataki directed New York State’s economic develop- ment entity, the Empire State Development Corporation (ESD), to work with state agencies. Source: Port Authority of New York and New Jersey

Case Studies 133 NYSDOT, with the assistance of ESD, coordinated closely in structuring the complex pro- curement. In addition to satisfying New York State procurement requirements, it also had to comply with procedures as set forth in the APPP that included a preliminary application and approval by the FAA. The project also featured a multitude of internal and external stakeholders. Internally, in addi- tion to the FAA, the New York State Department of Environmental Conservation (NYSDEC) had concerns over the undeveloped acreage as did local economic development organizations and local elected leaders. The New York State Office of the Attorney General and Office of the Comptroller, independent of the governor, had to sign off on the preferred bidder. Externally, environmentalists, conservationists, hunters, organized labor, local chambers of commerce, homeowners, and others all weighed in (see Table C-8). Most critically among the external stakeholders, the APPP required airline approval to divert revenue off the airport as part of the transaction. The state established the Stewart Airport Commission (SAC) when it acquired the airport. Composed of local citizens, SAC met each month in open sessions and provided a forum for the expression of opinions on the privatization of the airport. Representatives from NYSDOT and ESD also proactively engaged stakeholders in an effort to build a consensus for the privatization. Separate from the P3 transaction, NYSDOT transferred a significant portion of the 5,600 acres of undeveloped property around the airport (known as the “buffer lands”), to NYSDEC as a con- servation district. Regarding maintenance and construction, an understanding was reached with organized labor that they would have a seat at the table. To mitigate traffic congestion issues, a new access road to the airport was planned, partially funded from privatization proceeds, so that traffic would divert from local roads. As for increased air traffic, a privatized Stewart Inter- national Airport would continue to comply with noise abatement procedures. As a result of its military legacy, there were several concerns with potential environmental conditions. NYSDOT commissioned Phase I and Phase II environmental assessments to better inform the market. Nonetheless, private parties expressed liability concerns with environmental hotspots that were identified. NYSDOT agreed to assume responsibility for remediating delin- eated sites to appropriate standards. On the issue of revenue diversion, the airlines were generally opposed and never provided their approval for privatization. Because of previous funding agreements, NYSDOT was able to avoid the airline vote by calculating the previous capital investment and categorizing the priva- tization proceeds as payment reimbursement. NYSDOT invested the remainder of the proceeds in aviation projects, thus avoiding running afoul of FAA Grant Assurance 25, which forbids diversion of airport revenue to other uses. Major Issue Categories Stakeholder(s) Development of buffer lands Conservationists, environmentalists, hunters, chambers of commerce, local elected officials, economic development organizations, NYSDEC Maintenance and new construction Organized labor Increased air and motor vehicle traffic Homeowners Environmental conditions NYSDOT, private party Revenue diversion Airlines, New York State Source: Interview Table C-8. Major issues and stakeholders for Stewart International Airport.

134 Evaluating and Implementing Airport Privatization and Public-Private Partnerships As the first of its kind privatization in the United States, NYSDOT and ESD faced various risks and uncertainties. To help with the procurement process, they retained technical and legal advisors. In June 1997, the state formally began, through ESD, the process of soliciting bids for a 99-year lease of the airport and, potentially, the adjacent undeveloped lands as well. Specifi- cally, the RFP “gave the bidders the option of proposing on (1) the airport, (2) just the unde- veloped land (approximately 5,600 acres), or (3) both.” In April 1998, NYSDOT selected SWF Airport Acquisition’s parent company, National Express Group, a UK-based transportation firm, as the preferred bidder in response to the RFP. The award also ended, for the most part, the controversy over whether to develop the buffer properties. SWF Airport Acquisition had no interest in the lands west of Drury Lane, and Governor Pataki announced with the priva- tization deal that he was directing that ownership, as well as management of 5,600 acres of the lands for possible future development or disposal, be transferred directly to NYSDEC, which has since made that portion Stewart State Forest. In April 2000, the lease became effective and Stewart Inter national Airport became the nation’s first commercial airport to be privatized under the APPP. New York Stewart International Airport Procurement Timeline Project Funding and Financing Under the 99-year lease agreement, SWF Airport Acquisition was to pay NYSDOT a total of $35 million, plus a portion of future revenues. The payment was broken down as follows: $24 million upon the signing of the lease; $6 million when four parcels of property, formerly used for landfill, have been fully remediated by the NYSDOT and transferred to SWF Airport Acquisition; and $5 million when a contract is awarded by the state for construction of a new access road to Stewart International Airport (FAA, 2004, “Report to Congress on the Status of the Airport Privatization Pilot Program, 49 U.S.C. §47134”). SWFAA also made $10 million in capital contributions during its operation of the airport (Port Authority of New York and New Jersey, 2008). The lease obligated SWF Airport Acquisition to pay NYSDOT 5% of its operating income if the number of enplanements exceeds 1.38 million a year and to invest $48.6 million in capital improvements at Stewart International Airport during the first 5 years of the lease period. In addition, SWF Airport Acquisition had to comply with certain administrative requirements, and the NYSDOT had to complete certain capital projects that were initiated before the lease.

Case Studies 135 The lease allowed for a sale by SWF Airport Acquisition any time after the fifth year, subject to the NYSDOT’s written approval. Sale of Lease In 2006, SWF Airport Acquisition decided to focus its U.S. efforts on school bus operations and moved to dispose of its lease on Stewart International Airport (National Express Group PLC Annual Report & Accounts 2006, n.d.). Partially due to the attacks of September 11, 2001, SWF Airport Acquisition was unsuccessful in increasing passenger traffic at Stewart Inter- national Airport. According to FAA data, the airport registered 274,126 enplanements in 2000, the year National Express assumed management, but only 156,638 enplanements 6 years later [FAA, n.d.(b)]. The company’s attempt to make the airport more attractive to passengers going to and from New York City by renaming it “New York–Hudson Valley International Airport” was abandoned amid local opposition (Ulster County Legislature, 2006). In 2007, PANYNJ purchased the remaining term of the lease for $78.5 million. Although National Express never disclosed the profitability of its operation at Stewart International Air- port, PANYNJ reported a $0.8 million loss in 2007, when it ran the airport for part of the year, and a $5.5 million loss in 2008, its first full year of operation. This suggests that the operation may not have been profitable for the private owner. However, National Express booked a profit of £16.2 million (approximately $33 million at the time) on the sale to PANYNJ, indicating that it earned a significant return on its investment (National Express Group PLC Annual Report & Accounts 2007, n.d.).

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A public-private partnership (P3) can be a dynamic tool to help infrastructure owners achieve a range of objectives on projects, such as incorporating lifecycle project costs into decision-making, benefiting from innovation in design and construction techniques, or sharing certain performance risks.

The TRB Airport Cooperative Research Program's ACRP Research Report 227: Evaluating and Implementing Airport Privatization and Public-Private Partnerships expands upon research presented in ACRP Report 66: Considering and Evaluating Airport Privatization.

Supplemental materials to the report include a Comparative Deal Matrix database, a website for the P3 Readiness Assessment, and a presentation that communicates research findings to key technical and non-technical industry stakeholders.

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