Bush Officials Urge LAX Sale for Urban Aid

Senior White House officials are preparing a plan to encourage the City of Los Angeles to sell its international airport and use some of the proceeds to finance urban renewal in areas ravaged by recent riots, Administration sources said Thursday.

The proposal has been encouraged by factions within the White House as a promising showcase for President Bush’s new privatization initiative and a powerful brake on congressional pressure to devote more federal funds to the inner cities.

A plan under review at the highest levels of the Administration could offer Los Angeles new financial incentives to proceed with the sale of LAX and could give the city extra latitude in steering tens of millions of dollars in revenue toward urban rehabilitation projects.

A senior Administration official involved in the discussions said the idea had been given a tentative blessing by Vice President Dan Quayle, who is scheduled to meet next week with Mayor Tom Bradley.

“What this would do is provide a source of funds for a lot of inner-city problems without our having to go back to Congress and increase federal spending,” the senior official said.

The prospect of selling or leasing city-owned LAX, whose value is estimated at $2 billion or more, has been discussed for the last several years by Los Angeles officials.

But an executive order signed by Bush last month created extra incentive by giving local governments the right to maintain control of most money received from the sale of airports and other assets that had been built with federal government help. Under the order, local governments would have to repay Washington only the amount of the original federal grants. Previously, cities had to treat the government as a shareholder entitled to a share of the sales proceeds equivalent to the government’s share of the original costs.

The directive allowed leftover proceeds to be used by cities specifically for tax reduction, debt relief or infrastructure improvements.

White House officials believe that Los Angeles could clear at least $100 million if the airport were sold, even after recovering capital the city invested in the project. In the days since the riot, those officials have come to see that windfall as a way to hold down federal spending while still addressing the need for inner-city development.

As added encouragement to Los Angeles, sources said, officials are considering plans that would forgive the city of any obligation to reimburse Washington for the original grants or would broaden the accepted uses of the proceeds to include such projects as job training.

In contemplating such steps, White House officials appear to be particularly eager to broker the Los Angeles airport sale because the use of revenues for urban aid would provide a kinder and gentler dimension to the controversial privatization initiative.

Los Angeles officials--simultaneously struggling to recover from the riots and close a projected $183-million budget deficit--had mixed reactions to the White House initiative.

Although some City Council members have pushed the sale of the airport for more than a year as a cure to the city’s financial woes, others have said they fear that such a deal might limit local control over LAX.

And local support for any plan would be critical. Even with the removal of federal restrictions on how airport revenues can be spent, the sale of LAX would still require City Charter amendments and the removal of restrictions on airport construction bonds.

“I’m really pleased to hear it,” said Councilwoman Joy Picus, who last year proposed sale of the airport. “It doesn’t make much sense to be cutting police and closing libraries and then have these tremendous assets we are sitting on that cannot be touched.”

Councilman Joel Wachs said he has high hopes for such a plan but wants to see details of the President’s proposal. “The federal obstacles (to the sale of the airport) have always seemed like the most difficult to overcome,” Wachs said.

Councilwoman Ruth Galanter, on the other hand, said she fears that the White House proposal may be a “hostage situation”--forcing the city officials to give up control of the airport to get more money in the city treasury.

A report on the possible sale of LAX, and its overall financial future, was commissioned by the city’s Airport Commission a year ago. The report is due out at the end of the month.

Clifton A. Moore, executive director of the airport, said the airlines will be a formidable lobby against any change in the status quo because they fear their costs would increase.

“It will be very, very difficult to achieve,” Moore said of the airport sale. “It will have very powerful opponents. And they are not just going to sit around and watch it happen.”

Administration officials acknowledged that it could take at least a year to complete the sale of LAX even if the plan won local approval. But they said Los Angeles could borrow money for urban renewal based on the pending sale as soon as the proposal was approved by voters.

A spokesman said the mayor is concerned that the sale of the airport “may be fraught with many problems.”

Bradley wants to see details of the plan before elaborating, press deputy Bill Chandler said.

But a source familiar with the mayor’s office said there is concern that the city might be asked to give up other federal funding in exchange for a clearance to sell the airport. “There’s a concern that it might be a way for Washington to tell the city to solve its problems on its own,” said the source, who requested anonymity.

After Bush visited Los Angeles last week, Bradley said he still hoped that the federal government would provide more assistance, and a proposal that relies on sold-off city assets for rebuilding is certain to be controversial.

But advocates within the White House said they hoped to win approval by Bush for the extra incentives that might overcome the resistance of Los Angeles officials. They said, for example, that the contemplated proposal to waive federal reimbursement could provide Los Angeles with at least $50 million in extra aid.

The officials said it was unclear whether Quayle would make such an offer in his meeting Wednesday with Bradley, and they cautioned that the vice president had not yet decided how emphatically to urge the mayor to proceed with the airport sale.

But a ranking Administration official said Quayle had been briefed about the prospect of using the airport sale proceeds for riot relief and was “receptive to having it promoted out there as a policy option.”

The most aggressive advocates of the proposal reportedly serve on Quayle’s staff, including the Council on Competitiveness, which was instrumental in drafting the executive order on privatization. White House officials said any plan to go beyond the terms of the directive could meet with opposition from the Office of Management and Budget.

Among those who have briefed aides to Quayle about the prospect of using airport revenue to finance urban renewal are officials of the Los Angeles-based Reason Foundation, a think-tank that embraces free-market initiatives.

In an interview, Bob Poole, the head of the organization, said he believed that Los Angeles should have the right to decide whether to use revenue from any airport sale for rebuilding. But he said privatization would offer a “win-win proposition” for Los Angeles “to turn physical capital into financial capital” for urban renewal and other projects.

Times staff writer James Rainey in Los Angeles contributed to this story.