Long Beach takes airport issue private

In a closed meeting scheduled for today, the Long Beach City Council is set to discuss whether to lease some, if not all, of the city’s small commercial airport to private investors, a move that could generate millions of dollars in municipal revenue.

The idea has already sparked controversy over whether such an important policy matter should be considered in secret and whether relinquishing control of a valuable city asset to a private company would be in the best interest of the public.

“It’s horrendous that this has been scheduled for closed session,” said Councilwoman Gerrie Schipske, who plans to call for an open discussion of the matter. “The airport is a sensitive political issue in this city. We need to do this publicly.”

Schipske and two other council members contend that no business negotiations are underway -- the state’s open-meetings law exempts such discussions -- and closed sessions should not be used to float ideas of critical importance to Long Beach citizens.

Local governments that have tried to privatize airports in the past have found it to be a slow and frustrating process. Since 1997, a Federal Aviation Administration program to privatize airports has had six applications. Five have been terminated or withdrawn because of community opposition, inadequate business plans, a lack of financing or a repurchase by a government entity.

The only application awaiting FAA approval is from Chicago Midway Airport, which now serves about 17 million commercial passengers a year. Its proposed 99-year lease to a consortium of investors could provide Chicago with about $2.5 billion. Supporters say it could be a model for airport privatization.

Long Beach Mayor Bob Foster was unavailable for comment. But Becki Ames, his chief of staff said, “The mayor’s position is that there is no harm in having a discussion on this issue. Right now, he has more questions than answers. He also feels that, no doubt about it, there needs to be a full public vetting.”

City Manager Pat West said the discussion would involve unsolicited inquiries from financial institutions interested in acquiring airport assets and exploring whether Long Beach should apply to the FAA program. The firms include Citigroup, J.P. Morgan, Goldman Sachs, Merrill Lynch and Morgan Stanley.

West said he called for the closed session because the inquiring companies may need to disclose sensitive financial information. Discussion of trade secrets or financial statements can be held in executive session under the open meetings law, the Ralph M. Brown Act.

“We handle all of our real estate transactions in closed session,” West said. “We wouldn’t want to share peoples’ financial statements in the public arena. If the City Council decides to go forward with this, then it would immediately enter the public arena.”

West said that the airport is not for sale and that he would not stand in the way if council members want to discuss the matter in an open meeting.

The Long Beach Airport, which has been owned by the city for almost 85 years, handles about 3 million commercial passengers annually. It is also popular among private pilots, commuter services and corporate jet operators, which account for about 23,000 to 24,000 takeoffs and landings a year.

The airfield is known for its vintage terminal, built in 1940, and convenience for travelers, who can usually get through check-in and security faster than at other commercial airports in the L.A. area.

Long Beach is financially self-supporting, generating about $28 million a year, and one of the few local airports with stable passenger levels despite one of the worst slumps in the airline industry. The airport is served by Alaska Airlines, US Airways, JetBlue, FedEx, UPS and Delta Air Lines.

Because of noise restrictions stemming from a 12-year court battle, Long Beach is now limited to 41 commercial flights a day and 25 flights a day by commuter airlines. Of the commuter slots, only five have been taken, airport officials say.

“I don’t see this as a very attractive target for a takeover by private companies,” said Councilwoman Tonia Reyes Uranga. “The airport is close to residential areas, and there’s a grand-fathered noise ordinance that would be of concern for at least four of the city’s nine council districts. I don’t know how the airport will be profitable unless there is expansion.”

Uranga and her council colleague, Rae Gabelich, said that privatizing the airport could mean a loss of city control and a decline in the quality of life in nearby neighborhoods if private investors sought to add flights to increase their profits. Uranga and Gabelich agreed with Schipske that the matter should be discussed publicly.

“Don’t spend a dime on it,” said Gabelich, who has opposed airport expansion. “We need to look at the impacts on our city 10, 15, 20 years from now. The airport is surrounded by affluent neighborhoods that provide substantial property tax revenue for the city. Airport expansions lower the property values of surrounding homes. We can’t afford to lose that tax base.”

But Councilman Gary DeLong said he was willing to have the discussion in either open or closed session. “As long as the noise ordinance is protected, I applaud the city manager for thinking outside the box,” DeLong said. “Unlike some of my council colleagues, I am going to wait to hear all the facts before I take a position.”

Privatizing government-owned assets, such as utilities, bridges, roads and airports, is being touted by supporters as a way for many local and state governments to raise money for new projects or to help solve growing budget deficits caused by the economic recession.

More than 50 airports around the world have privatized their operations, management or ownership since 1987. The practice is common in Canada, Europe and Asia.

In the United States, however, only one airport has been privatized under the FAA program: Stewart Airport in Newburgh, N.Y. Stewart was removed from the program in 2007 when it was acquired by the Port Authority of New York.

Ian Gregor, an FAA spokesman, said the agency had not received any new applications for the four available privatization slots.

Last month, the L.A. controller’s office suggested that Los Angeles World Airports should consider privatizing operations at Ontario International Airport, which has had a 30% decline in commercial flights this year.

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