Airport Plan Clears Initial HurdlePosted: Updated:
The Gary Airport Authority could give final approval in late January to a $100 million public-private partnership to operate the Gary/Chicago International Airport. Our partners at The Times of Northwest Indiana report the deal with a Virginia-based firm, which includes profit sharing with the airport and the city, cleared a preliminary vote this week. The proposal calls on the firm to invest $25 million in the airport over the first three years and maintain a minimum of a 30 percent local work force. Final approval could come at the authority's January 27 meeting.
Originally Posted December 9, 2013
GARY, Ind. - With terms poised to dramatically improve the economic landscape of the Gary/Chicago International Airport, the City of Gary and Northwest Indiana, development and management agreements presented today to the Gary/Chicago International Airport Authority by the airport's public-private partnership (P3) committee propose a $100 million total investment in the airport and the City of Gary over 40 years by best in class private interests. Terms include an investment of $25 million in the first three years and a minimum 30 percent goal for local workforce participation as well as performance incentives for revenue growth including profit sharing with the airport and the City of Gary.
The proposed terms were negotiated by the Ad Hoc committee with Aviation Facilities Company Inc./AvPORTS (AFCO), Guggenheim Securities and Loop Capital.
AFCO, based in Northern Virginia, is an industry leading airport management firm with over 80 years of experience successfully managing similarly situated airports and other airport related infrastructure throughout the country. Guggenheim Securities, headquartered in Chicago and New York, is a universally recognized, first in class global financial services firm with over $190 billion in assets under management and unrivaled experience in large-scale infrastructure investments. Loop Capital, based in Chicago, is a leading investment banking firm well known for providing creative capital solutions for governments, corporations, and institutions globally. Also serving the investment team as a senior development strategist is Michael Mullen, former CEO of CenterPoint Properties Trust. Mullen has developed or redeveloped more than 70 million square feet of industrial properties and has been involved in more than $8 billion in real estate transactions in his career including large-scale intermodal rail and transport yards. Mullen is also the Illinois Chair of the Alliance for Regional Development.
"Public ownership and private investment are the cornerstones of these proposed agreements," said Carrie J. Hightman, chair of the P3 Ad Hoc Committee and executive vice president and chief legal officer of NiSource Inc. "The airport is a catalyst to uniquely unlock the value of the City of Gary and Northwest Indiana. These proposed agreements bring together world class management, creative development and strong capital partners to accelerate investment for job creation and long-term sustainable growth."
The airport authority has the final review and approval over terms presented by the P3 committee. Final action by the board is expected in the coming weeks. Should the airport authority approve the terms, final contracts could be effective in early 2014 following a public hearing of ordinances.
KEY PROVISIONS INCLUDE
The proposed management and development agreements each carry a term of up to 40-years and include a 30 percent goal for local participation, 20 percent for disadvantaged and minority owned businesses (DBE, MBE) as well as 5 percent for women and veteran owned businesses (WBE, VBE).
-Master development plan to be presented within in the first 12 months of the effective date
-Master plan to include a 10-year proposed investment and action plan intended to achieve a $100 million investment over 40 years
-$25 million invested in first 36 months ($10 million in first 18 months, $15 million within the next 18 months)
-$2.5 million new development/investment that can be executed during the 6 months after the effective date
-$15,000 expenditure goal within first three months for workforce/community development
-$300,000 in workforce development over three years ($50,000 in first year, $100,000 in second year, $150,000 in third year) ◦generally targeted to work and college readiness programs, small business development programs, employer and job seeker database
-City of Gary to share in 20 percent of net profits of city property contributed, sold or leased for development.
-If master developer fails to satisfy the $25 million investment before 5th anniversary, the airport authority will be entitled to terminate development agreement
-Manager will provide daily operation and management services at the airport
-The initial term of the management agreement will be 10 years, with up to six 5-year extensions
-Estimated airport cost of $120,000 annual fee plus operating costs of airport
-Manager will assist with the airport's current runway expansion project as additional services
-Manager will share in 15 percent of positive airport profits
-Manager will share in an additional 5 percent of positive airport profits if it satisfies the DBE/MBE/WBE/VBE and local participation requirements
On October 25, the Ad Hoc committee announced exclusive negotiations with AFCO and the other financial firms. The airport authority created the Ad Hoc committee in February 2013 to solicit and evaluate public-private-partnership opportunities that retain public ownership of the airport and benefits from private sector innovation and access to capital.
Source: Gary/Chicago International Airport