County Invites Potential Buyers to Bid on Airport

Still looking to unload John Wayne Airport to bail out bankrupt Orange County, Chief Executive Officer William J. Popejoy said Tuesday that he wants potential buyers to submit bids detailing how they would overcome legal and financial hurdles standing in the way of selling the airport.

“The county is interested in finding out if anyone out there who does this sort of thing knows if this can be done,” Airport Director Jan Mittermeier said. “We just don’t know how--no one at the airport does--and we’re looking for someone who might have the answer.”

Mittermeier said she and Popejoy spent the past week discussing the process and have tentatively called a special meeting Monday of the John Wayne Airport Commission to discuss the idea.

The commissioners are an advisory group that makes recommendations to the Orange County Board of Supervisors. The board is not bound by their recommendations.

John Wayne Airport is one of the county’s most profitable assets, with revenue topping $58 million last year from sources as diverse as commercial filming permits and parking fees. But under federal law, the county is prohibited from tapping into those funds for non-airport uses.

Federal regulations do not appear to distinguish between sale proceeds and ongoing revenue, aviation experts said. Current regulations require that all airport revenue--even proceeds from a sale--be used for airport services. As a result, it appears that Orange County wouldn’t be able to turn a profit if John Wayne Airport is sold.

Also, before the airport could be sold, the county would first have to repay $253 million in bonds and $66 million in Federal Aviation Administration grants and get federal law changed to allow the proceeds from the sale to be kept in the county’s general fund.

“We’re looking at a unique, creative way so that the county can get immediate money to the general fund, either through a sale or some other transaction that some can point us to,” Mittermeier added.

Since the county’s Dec. 6 bankruptcy, selling the airport has been held up by some as an attractive idea that could generate up to $500 million. Many business and community leaders say they believe it is a viable alternative to raising taxes.

*

But after studying the issue for several weeks, Popejoy concluded last month that there are too many problems with trying to sell the airport, at least within the next couple of years. Instead, he suggested using the facility as collateral in return for a state guarantee on $236 million in recovery notes intended to repay the county’s debt.

Nonetheless, Popejoy is still interested in any proposal that might make the sale of the airport a reality.

“I think we’ve always said the airport is for sale, but there are some clear obstacles on the route to selling it,” said Paul Nussbaum, an adviser to Popejoy. “This is just a further step in that process. I’m sure it will cause a very active discussion on the part of the airport commission and other consistencies.”

Popejoy could not be reached for comment.

No other public airport has ever been turned over to private hands--a factor that is making the study of the issue especially nettlesome. While looking for potential buyers, Popejoy’s proposal is also a cry for help in determining whether it is even possible.

“There are no other airports that have ever been sold to the private sector. This would be the first if it were to happen,” Mittermeier said. “There are considerable restrictions on the use of airport revenues, and it’s unclear whether we can get around that.”

A source close to the issue who declined to be identified said a sale of the airport is extremely unlikely, mostly because the federal government wants to retain its control over the airport and does not want to open the floodgates to similar sales nationwide.

“The FAA has been pretty clear that sale proceeds need to stay with the airport,” the source said. “I don’t see this as viable without some kind of special federal legislation or significant changes to current regulations.”

Furthermore, the specter of a commercial airport at El Toro Marine Corp Air Station would also impact the successful sale of John Wayne Airport. Any sale would have to also include the rights to develop a commercial airport at the base once it closes, aviation and financial experts have said.

Despite public support for the idea, the sale of John Wayne Airport has stirred tremendous opposition from airline groups.

*

The Air Transport Assn. of America, which represents nearly all carriers providing passenger service to Orange County, fears privatization will lead to higher fees for carriers and “will strongly oppose it,” spokesman John Ek said.

“When you insert a third party into something like this, it is the intent of that third party to make money, and that means raising the rates and charges to the people providing services to that facility,” Ek said.

Even Popejoy has acknowledged that selling the airport could result in higher airline ticket prices for passengers out of John Wayne.

Jack Lindquist, a member of a special airport task force formed to find ways for the county to wring money from the airport, questioned whether the seeking of bids at this time is premature.

Gary Proctor, chairman of the airport commission, said the commission would be willing to endorse an airport sale but said he fears the thicket of federal regulations could strangle any effort--and ultimately further drain Orange County’s resources.