Privatizing LAX: A Plan That Won’t Fly

President Bush’s keen interest in privatization--the sale of public facilities to produce new revenue--predated the Los Angeles riots. But Bush’s latest plan, to encourage Los Angeles to sell its international airport to finance urban renewal in areas hit hard by the riots, is not in the city’s long-term best interests.

Moreover, as a showcase for Bush’s so-called privatization initiative, the LAX proposal could dilute growing pressure to devote constructive federal attention and dollars to the nation’s inner cities. As such, the plan, still under review by Administration officials, smacks of doing something without doing much at all.

Exasperation with L.A. International Airport’s current operating arrangements, more than economic sense, has driven the privatization bandwagon. City-owned LAX initially prospered by guaranteeing airlines long-term, bargain-basement landing fees. Equally important, City Charter provisions have shielded airport revenues from the reach of other city departments. As the city’s general fund is stretched, officials look longingly at the airport’s untouchable profits--$25.6 million last year alone. But to tap into airport funds, voters must first rescind charter provisions that cordon off those funds; revenue bonds that keep airport landing fees low as part of an operating formula must expire, and the Federal Aviation Administration would have to approve the changes.

These are formidable obstacles and they have prompted some City Council members instead to support outright sale of the airport. A purchase price estimated as high as $2 billion is tempting. But some of the same legal obstacles--charter provisions and local revenue bonds--that constrain the use of funds from a publicly owned LAX may also constrain its sale.

The President’s LAX proposal may allow the FAA to exempt Los Angeles from repaying federal bonds if the city sells the airport. His proposal may make it legally easier to sell, but it doesn’t make such a sale any more sensible.

Los Angeles should be able to tap airport funds for strapped city services, but selling LAX is unwise. Estimates of the airport’s $2-billion sale value are questionable. Moreover, as happened with private lease arrangements of county-owned Marina del Rey property, private ownership or operation of government property or services raises concern about accountability to taxpayers.

A consultant retained by the city will report this month on alternatives to the present leasing arrangement, including reconfigured public ownership that would allow airport funds to better serve all city residents. The challenge for the City Council will be to follow through on constructive recommendations that emerge.