City Raises Debt Claim for LAX to $350 Million

The Los Angeles International Airport owes the city’s general fund $350 million--about $250 million more than previously estimated--in reimbursement for services and investment income dating back to 1928, according to a report released Monday by the city controller’s office.

Although Controller Rick Tuttle said the report could trigger a windfall to help plug the city’s looming budget deficit of $200 million to $250 million, airport activists described it as April Fool’s gold, insisting that all old debts have been repaid and that it is illegal for the city to try to collect what would have been earned decades ago in interest.

“We think that City Hall is really only fooling itself. Apparently, they think history changes as the city’s budget needs change,” Scott Macdonald of Citizens for a Strong LAX said at a news conference. “It’s kind of like watching the beginning of the ‘Bullwinkle’ show, where Bullwinkle says, ‘Watch me pull a rabbit out of my hat,’ and Rocky says, ‘Again?’ Watch them pull another ancient loan out of their hat.”

The dispute concerns money the city loaned its semiautonomous Department of Airports for capital improvements, as well as various fire-related services provided to LAX. It is the latest controversy in the long-running debate about whether profits from the financially successful airport can be used to help the cash-strapped general fund.

A county grand jury report last year estimated that the airport owed the city about $100 million in reimbursement and interest, which the airline industry and other airport activists disputed. Tuttle’s report concerns the same themes, but updates the numbers with $25 million more in advances from the general fund and $226 million in interest that could have been earned on that money.

“We’re very hard-pressed with a city deficit,” Tuttle said. “We’re also trying to add police. We very much need the revenues--and furthermore, the airport itself is going very strong. We believe, therefore, that it’s possible for a repayment schedule to be put together.”

But Citizens for a Strong LAX accused Tuttle and others at City Hall of building a back door to siphon profits off the airport for other city services, which is prohibited by federal law.

In fact, several aspects of Tuttle’s new report are being debated in Washington. The U.S. Department of Transportation recently proposed a policy that would prohibit a city from collecting interest on money loaned for airport development, and the public has until April 26 to comment on it. Another pending controversy concerns whether decades-old loans need to be repaid at all.

The airport coalition also challenged the analysis by the independent auditors used for Tuttle’s report, contending that if anything, the general fund probably owes the airport money. Further, the activists described LAX as the region’s “economic engine,” and said the city should leave its coffers alone.

“The airport is the golden goose. The city is throttling that goose with these attempts to take illegitimate money,” said Steven Moss of M. Cubed, a San Francisco consultant the airlines hired. “It’s quite clear to me that there’s cherry picking going on. The city’s going back and looking for money. If they looked at the entire record, I really do think they’d find it stamped, ‘Paid in Full.’ ”

Although Mayor Richard Riordan’s administration has long tried to reap profit off the airport, his aides said Monday they are not ready to count the $350 million in Tuttle’s report in the budget they are preparing.

“The analysis is based on some optimistic things that I don’t think [we] necessarily subscribe to,” acknowledged mayoral budget director Chris O’Donnell. “There’s no question that it would help, but I think we have to be realistic as to what we can hope for. We don’t want to base our hopes for balancing the budget on things that are not going to materialize.”