CALIFORNIA COMMENTARY : Betray the Past, Sabotage the Future : Privatize LAX? Without the airport and other public projects as lures, private development would have skipped L.A.

A new band of well-heeled looters entered Los Angeles late last week. Led by the free-market ideologues on Vice President Dan Quayle’s staff, the Bush Administration urged the sale of the municipally owned Los Angeles International Airport. The windfall proceeds, they argue, could be used to finance urban-renewal projects in riot-torn areas and help reduce the city’s burgeoning budget deficit. The proposed airport sale is touted as a vital urban showcase for the President’s new privatization initiative.

Robbing Los Angeles of its publicly owned airport is a dangerously wrongheaded idea, betraying the city’s past and, more important, sabotaging its future. Privatization supporters suffer from acute political amnesia. They display little understanding of how Los Angeles was actually built.

Privatization is a total negation of Los Angeles’ historical experience in the 20th Century. The city early on tasted the bitter fruits of a privately run infrastructure. In the late 19th Century, the Southern Pacific Railroad charged Southern Californians all that the traffic would bear. Similarly, local privately owned water and power companies treated their customers as cash cows to be frequently milked with high prices and poor service.

The City of the Angels thus learned the hard way about the limits of private enterprise. As monopolies with investor pressure to produce quick economic results, private infrastructure providers acted as short-term profit maximizers. In particular, they could not make the expensive and needed long-term capital investments, such as the Owens River Aqueduct, that did not promise immediate economic payoff.

Forsaking failed private enterprise, Los Angeles chose to become the nation’s first Keynesian city-state. From the Progressive Era onward, the city deliberately--and wisely--chose a public, not private, strategy of infrastructure development. LAX represents the postwar capstone of this policy of a municipally owned infrastructure. The Harbor and Water and Power departments, however, are the true cornerstones of modern Los Angeles.

Massive municipal projects supplied the three essential pillars of early regional growth: the man-made harbor at San Pedro-Wilmington (the largest in the world); the Owens and Colorado River aqueducts (among the most complex engineering feats of their age) and the Department of Water and Power’s hydroelectric plants (the largest municipal power system in the nation), generating the cheap energy needed to attract Eastern industry after World War I. The federal government played a major role in subsidizing these projects.

Public enterprise underwrote the city’s phenomenal pre-World War II population growth, industrialization and territorial expansion. The city’s development agencies deliberately set low dock, water and power rates to encourage growth. Los Angeles’ public infrastructure investments were an essential precondition to private development, such as the region’s burgeoning real-estate market.

In the postwar era, the Airport Department became a potent new public engine of growth. Like the city’s other infrastructure projects, LAX heavily relied on federal assistance. Federal Works Progress Administration money was used to extend the municipally leased runway at Mines Field (as it was then called). Later, the city employed federal matching funds to buy the airport. In all, the federal government paid considerably more than one-half of the early construction costs of LAX.

Used for military, and not commercial, purposes during World War II, the city’s public airport played a major role in building the region’s aerospace industry. After the postwar transition to commercial use, LAX used low landing fees as a magnet for growth. More recently, LAX and the Harbor Department have figured significantly in the region’s economic shift from reliance on manufacturing to foreign trade with the Pacific Rim and Mexico.

International airports like LAX are enormous job generators. New York’s Kennedy Airport, for example, creates as much employment as all of midtown Manhattan does. By 1996, about one in six jobs in Greater Los Angeles will be dependent on international commerce, up from one in 10 in 1990.

The city’s public enterprises have repeatedly demonstrated the ability to make the long-term and expensive infrastructure investments required by an increasingly internationalized economy. Current plans call for doubling the capacities of the airport and harbor to capture a larger share of Pacific Rim trade.

A privatized airport would not serve as a comparable vehicle for growth. In private hands, LAX would be under enormous pressure to generate quick profits. Landing fees would skyrocket. And long-term investments would be scaled back as a drain on current profits.

The benefits of privatization to the city are equally dubious. In today’s recessionary environment, the airport would sell at fire-sale prices. While the city might realize a one-time quick budgetary fix from the sale, estimated at between $100 million and $150 million, it would lose a reliable and long-term revenue source.

As the United States did in Vietnam, the Bush Administration seems intent on destroying Los Angeles to save it. The Administration’s proposal to sell LAX so that inner-city mini-malls can be rebuilt with city (and not federal) money is ill-advised. The privatization scheme is a betrayal of Los Angeles’ progressive heritage and promises to sabotage the city’s economic future.