Study Says City Would Gain by Keeping LAX


The city of Los Angeles would make greater long-term financial gains by maintaining public control of its international airport rather than selling it to private investors, according to a long-awaited report presented Wednesday to the city's Airport Commission.

Los Angeles could reap about $200 million a year, and net $3.4 billion over 30 years, for its beleaguered municipal operations if it can remove restrictions that require airport revenue to be spent only at Los Angeles International Airport.

Selling the airport--as suggested recently by senior White House officials as a way to finance rebuilding of Los Angeles after the riots--would net the city up to $2.6 billion during the same period, according to the report by the John F. Brown Co., a consulting firm hired nearly a year ago to study airport finances. It said leasing the facility could bring in $3.2 billion.

The consultant will not make a final recommendation on what course the city should take in the operation of LAX for another month. But officials were optimistic about the magnitude of the figures in the report, saying the money could help restore services and rebuild neighborhoods in a city beleaguered by recession and rioting.

"While this report is preliminary, the increased revenue that may be generated by the city maintaining control of the airport could benefit everyone in the long run," said Vallee Bunting, a spokeswoman for Mayor Tom Bradley.

Bradley last week urged Vice President Dan Quayle to help lower federal restrictions on the use of airport revenue so the city could spend money from LAX to improve police and fire service.

"I guess I was right," said City Councilwoman Ruth Galanter, who has led a City Council effort to spend airport revenue throughout the city. "If it's our airport and we get the revenues, we would have an incentive to operate it as efficiently as possible."

Just hours before the report was issued, the council took a first step toward gaining access to revenue now controlled by the semi-independent city Department of Airports. The council voted unanimously to draft a City Charter amendment that would permit money raised at the airport to be spent throughout the city for general services.

The amendment could be placed on the ballot as early as November. If passed, it would strip away restrictions that have required airline landing fees, parking lot charges and concession revenue to be spent only at the airport.

If other legal obstacles can be cleared, the city would be in a position to profit from an anticipated boom in business at LAX and an upcoming renegotiation of fees that it levies from airlines, the report concludes.

Airport traffic is expected to increase from 46 million passengers a year to 60 million by the turn of the century.

And at the end this year, the city's agreements with air carriers--which have made LAX the cheapest major airport in the country for airlines--will expire. It would be "fair and reasonable" for the airport to nearly triple its charges from the current level of about $2 a passenger to $6, providing a massive infusion of revenue, according to the report.

An outright sale of the airport would produce $1.8 billion to $2.6 billion over 30 years. The consultants concluded that "there is little doubt that a properly restructured LAX would find willing buyers, investors or operators."

But the report says that a private operator would not necessarily run LAX more efficiently than the Department of Airports. "A private operator might create cost savings in certain areas, but would probably incur increased costs in others," the report says.

The report also says sale of the airport would produce less revenue for the city than keeping LAX in public hands because its sale price would be reduced by the high taxes and financing costs that private investors would confront.

The diversion of excess airport revenue to the city's general fund would not only provide more--$3.4 billion--over the 30-year period. It would also keep the base value of the facility, more than $1 billion, in public hands.

Although airport commissioners did not say which option for airport operations they would favor, there were indications of support for keeping the facility in public ownership.

"We cannot look at approaches that will give a short-term kick to the finances and forget the long term," commission President Robert Chick said.

Lawyers said there do not appear to be any insurmountable legal obstacles to any of the proposals, although many of the political decisions are hard to predict.

At least two other changes will be needed besides the charter amendment: revisions in federal laws that require airport revenues to be spent at airports, and modifications of bonds sold to build LAX, which include the same restrictions.

Proposals to sell LAX to bolster city services have been in the air for several years. Ten months ago, the Airport Commission ordered a study on the financial benefits and legal barriers to a sale.

The proposal attracted new attention two weeks ago, when White House officials revealed that they were working on a proposal that would allow the city to sell LAX and keep the proceeds to help rebuild large sections of the city destroyed in the riots.

Local officials, including Bradley, expressed skepticism about the proposal, fearing that it might reduce local control of airport operations and be offered as a substitute for other federal programs to aid the city.

On Wednesday, officials in Washington backed further away from the proposal to sell LAX. A spokesman for Quayle said the Administration had never intended to force Los Angeles to sell its airport, but merely offered to expedite the sale if that is what local officials chose.

White House press secretary Marlin Fitzwater, when told of the consultant's report, said: "It's up to local authorities--whatever they want to do."

Times staff writer James Gerstenzang in Washington contributed to this story.

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