LAX Reimburses City $31 Million

Los Angeles International Airport on Monday reimbursed the city’s general fund $31 million in decades-old loans and investments--a move hailed by some as a windfall but derided by others who contend that it could end up jeopardizing federal funding for the Metropolitan Transportation Authority.

Mayor Richard Riordan’s office, City Controller Rick Tuttle and Councilman Mike Feuer were in the windfall camp, exulting at the infusion to the city’s dwindling coffers and pleased at the long-awaited resolution of a lengthy battle over whether the quasi-independent airport should repay taxpayers for millions invested in capital improvements and fire safety at LAX in the 1950s and 1960s.

“This is money to which the city has been entitled for years and years,” said Feuer, vice chairman of the council’s Budget and Finance Committee. “It’s about time it was paid back to the taxpayers of Los Angeles.”

Federal law prohibits the use of airport funds for any non-aviation purpose, but there is a dispute about whether old loans, such as those in Los Angeles, should fall into that category. Critics, such as Councilman Nate Holden and John Ek of the Air Transport Assn., which represents the nation’s major airlines, say they do. They warned Monday that legislation recently passed by Congress demands a dollar-for-dollar reduction in MTA funding if money is found to have been transferred illegally from the airport to the general fund. The bill, which allocated only $70 million for Metro Rail rather than the $158.9 million the agency requested, is awaiting President Clinton’s signature.

“There’s no way they can legally transfer that money. The law is not on our side,” said Holden, who heads the council’s Transportation Committee and led a successful campaign among council members last spring to take a $30-million airport transfer out of the mayor’s proposed budget for fear it would threaten the MTA’s grant. “They’re virtually shutting down MTA operations--that’s buses, construction, everything. [Riordan] thinks he’s bigger than the federal government, but he’s not.”

Ek shared Holden’s anger, saying Tuttle and Riordan “have cost the transit riders of Los Angeles about 31 million bucks.”

“Four months ago, at the wisdom of the City Council, the mayor was turned down. Now we have a sneaky back-door tactic to try and get the money, with no vote of the City Council, without any City Council action whatsoever,” Ek said. “The mayor isn’t above the law.”

Riordan’s budget director, Christopher O’Donnell, said he is confident that the transfer is legal, noting that the county grand jury, Tuttle and an independent private auditor all have recommended the transfer. “Our attorneys have looked at this and we don’t believe it is illegal whatsoever,” O’Donnell said.

Tuttle acknowledged that he accelerated his request that the airport repay the general fund after the federal legislation was passed linking the airport to the MTA to “reduce the risk of exposure” for the transit system. He added that he believes the linkage is “inappropriate.”

Tuttle also contends that the airport owes the city $200 million to $300 million in interest for various loans or services that were never paid for, some dating back to 1928. The U.S. Department of Transportation recently ruled that governments cannot collect interest on such loans, but Tuttle said Monday that Los Angeles should battle that decision in court.

MTA spokesman Ed Scannell declined to comment in detail on the developments, saying only: “We’re going to have to see what implications this will have on the MTA.”

Lawmakers at City Hall said Monday that it is too early to guess what the money might be used for, but it was welcome news at a time when the city’s reserves are dwindling. A recent report from the city administrative office indicates that the reserve fund has less than $17 million, far below the planned sum of $28.1 million, which itself was short of the $30 million that budget planners believe is prudent.

O’Donnell and Tuttle both indicated they would like to see the airport money used to help pay for Riordan’s aggressive expansion of the Police Department, but Feuer said he does not want the one-time windfall to go toward ongoing expenses such as salaries. He noted that the transfer is likely to be challenged in court, so it may yet be too early to start spending it.