Sale of Airport: an Idea Trying to Take Flight : Government: County could turn John Wayne over to transportation agency and get cash with which to build or invest, but such a deal raises a host of legal and other issues.

To the typical traveler, an airport may be just a building with ticket counters, gift shops and food stands near some skid-marked runways. But cash-starved local governments see something more lustrous than a duty-free Rolex: They see gold.

With state and local government deficits approaching $50 billion a year nationwide--and federal aid dropping precipitously--local politicians are scavenging for dollars in every nook and cranny, including airports.

The “gold” comes in the form of aircraft landing fees paid by airlines to use the airport, fees charged to concessionaires who sell the food and magazines that travelers buy, and parking revenue. There is a catch, however: Federal law prohibits use of airport revenue for anything but airport-related improvements. The solution: Sell or lease the airport, some experts say, to gain cash that will help solve municipal budget woes.

Enter County Board of Supervisors Chairman Roger R. Stanton, who on Wednesday suggested selling John Wayne Airport for at least $100 million to the Orange County Transportation Authority.

Specifically, Stanton said, the county gains no budgetary advantage by owning the airport because of the restrictions on use of airport profits. But the county could use sale proceeds to pay for a new jail or new South County civic center. He has since amended his statement, saying that the money could be invested, which would bring in several million dollars a year that could be earmarked indefinitely for health care programs.

The Transportation Authority, if it could come up with the funds, might want to purchase the airport in hopes of amending federal restrictions on airport revenue, or merely because it wants to control all transportation decisions within the county’s borders.

In making the suggestion, Stanton joined a long list of public officials throughout the nation who are considering the disposal of government assets or contracting management services to private firms as a way of paying for everything from badly needed jail cells to indigent medical care.

For example, New Jersey may turn over its motor vehicle inspection program to a private firm in order to save $22 million a year in operating costs. It would also be saving $40 million in pollution control equipment costs. Chicago has already turned over management of city parking and drug-treatment programs to privately owned companies.

But sell an airport?

No fewer than half a dozen cities in the United States are considering such a sale, including “biggies” such as Philadelphia, Baltimore and even New York City. Airports in Burbank, Albany, N.Y., and Morristown and Atlantic City, N.J., are already privately operated.

In Canada, Toronto’s glitzy new international terminal is privately built and operated and has a shopping center that includes a Harrod’s department store branch. In Britain, Heathrow and Gatwick were sold to private concerns. And now the Conservative government in London is selling British Rail.

Nevertheless, the sale of John Wayne Airport would be unique, experts say.

For one thing, Stanton proposed selling the airport not to a private firm, but to another government agency--the Orange County Transportation Authority. And the authority would have to seek special legislation or lease the airport to a private firm in order to use airport revenue for roads or rail projects.

Secondly, although other airports have been transferred between government agencies, no cash changed hands. For example, the federal government has transferred its ownership of Washington’s National and Dulles airports to a new, regional authority.

Sentiment about selling John Wayne Airport is mixed.

“I don’t know what to think,” said Newport Beach Councilman John C. Cox Jr., a veteran of anti-noise lawsuits against the airport. Privatization “is happening all over the world. . . . Government is reviewing its operations in terms of how it can downsize and privatize, and I have mixed emotions about it. . . .

“Generally, government is just too big and is too involved in a lot of stuff. From that standpoint, selling John Wayne may be a good idea,” he said. “But I’m not familiar with all the trade-offs. And hopefully you don’t just take that money and spend it on just anything.”

Indeed, New York and Boston airports are poorly run by independent port authorities partly because airport revenue has been raided to solve non-airport budget woes, said Robert W. Poole of the Reason Foundation, a Libertarian-oriented think tank.

Earlier this year, Poole persuaded Vice President Dan Quayle to propose the sale of Los Angeles International Airport to a private firm in order to raise funds for rebuilding riot-torn areas.

But steadfast opposition in Los Angeles from airlines, airport tenants and others has so far blocked such a sale. A consultant’s report found that the airport would generate more money for the city if it remained publicly owned or leased out instead of sold outright. So city officials are pursuing the idea of a city Charter amendment that would help free up some airport revenue for use elsewhere.

The port authorities in New York and Boston are able to divert airport profits, Poole said, because of a grandfather clause when Congress prohibited such behavior. The theory was that New York and Boston airports are operated by agencies that have multiple transportation responsibilities, such as New York’s Holland Tunnel and ship berths in the harbors.

The Orange County Transportation Authority may be able to persuade Congress that it deserves a similar exemption. Hawaii, for example, has already persuaded Congress to allow use of some off-site, duty-free shop revenue for transportation projects.

While New York and Boston have serious problems, Poole said, San Francisco’s airport has done well under the management of an autonomous port authority.

But total privatization, Poole argued, would work better at John Wayne.

“The problem with OCTA buying John Wayne Airport,” Poole said, “is that OCTA would have to divert transportation funds to pay for it.”

But there are other options. R.T. McNamar, a managing director of Oppenheimer & Co. in Los Angeles, said the Transportation agency could borrow money to buy the airport and repay the loans with revenue from leasing the airport to a management firm such as Lockheed Air Terminal Inc. Lockheed operates several airports around the nation and is owner-operator of the new terminal in Toronto.

Orange County Airport Commissioner Robert Cashman said that Lockheed and another company, Comarco, previously expressed interest in leasing or managing the airport.

“We as a company are in the business of airport privatization,” said Viggo M. Butler, president of Lockheed Air Terminal Inc. “We would be interested in making an arrangement with the county. . . . (But) the piece I’m not sure about is this intergovernmental transfer between the county and OCTA.”

It would be illegal to transfer an airport that is already paid for to another government agency that would have to pay for it again, in effect billing taxpayers twice, Butler said.

In the case of John Wayne Airport, however, most improvements were financed with bonds being repaid with airline landing fees and similar revenue, with only a small share covered by federal tax money.

“Straight privatization would be better than a transfer of authority to another agency,” Butler said. “But we’d still have to look at whether it was economically feasible.”

A recent executive order signed by President Bush allows airports to be transferred to private concerns without running afoul of the restrictions on use of airport funds.

Referring to Stanton’s John Wayne Airport proposal, Butler said: “The concept is one of investigating financial need versus prudent operation, and we think we can bridge those things.”

The airport commission’s Cashman, however, sees no future for Stanton’s proposal at all.

“It isn’t going to go anywhere,” said Cashman, who described the concept as a “raid” on airport funds. “The airport has the ability now to spend some of its money on connecting roads to the airport, without any transfer of power or privatization. And it’s a very wrong thing to do because it’s robbing Peter to pay Paul.”

He said the airport’s success and its role as a magnet for jobs in the surrounding area would be jeopardized if control went to the Transportation Authority.

“The supervisors have a much broader view of government than OCTA does,” he said. “OCTA would politicize the airport.”

Cashman said that because the authority’s 11-member board has six city representatives, the cities would each jockey for position. And if the city representatives came from hostile cities surrounding the airport, “they would strangle it. . . . It would stagnate the way Long Beach Airport has because no politician has the guts to do anything with it.”

The airline industry would undoubtedly fight Transportation Authority control, officials said. And one tactic is to spark fears of higher ticket prices due to increases in landing fees. John Wayne Airport’s landing fees are above average already.

“Our concerns are pretty fundamental,” said Roger Cohen, vice president of government affairs for the Air Transport Assn. in Washington. “How would the traveling public benefit? We’ve yet to see an instance where it has. . . . We are unalterably opposed to the use of aviation revenues for anything other than aviation purposes.”