It should go towards paying off debt and thus releasing the actual budget to doing what it should be doing.  St. Louis desperately needs to fix infastructure - from roads to sidewalks to bridge and invest heavily in education and public services.

Potential bidder for Lambert airport privatization appears to lose interest 

Local lawyers who had worked on Lambert airport privatization for Macquarie Group have severed the relationship, indicating the infrastructure giant may no longer be interested in making a bid in the controversial process.

Lawyers with Lewis Rice and Gamble & Schlemeier on Tuesday deregistered as lobbyists for Macquarie, according to state records. People familiar with the matter said the Australian company will not bid on a lease to run Lambert, even if the process moves forward.

[...]

Asked whether the city's pace could have affected market interest in the project, Martinez said, "I don't want to speculate on market interest because that would be premature."
Bob Poole, director of transportation policy at the Reason Foundation, a libertarian research organization based in Washington, D.C., said Macquarie, "a very reputable firm" in the infrastructure space, may have determined that "the prospects don't look that good."
"That could mean several different things," Poole said. "One, when they really crunched the numbers, the fundamentals for growth and improvements from (public-private partnership) management didn't look as lucrative as they thought it could be."
"Or it could be a political assessment," Poole said. "There may be a long, drawn out fight in order to get to 'yes' on this, and they have decided they have better opportunities that aren't as difficult."

Link (behind a paywall): https://www.bizjournals.com/stlouis/new ... j=88542831

Interesting developments. Seems like the privatization efforts aren't producing like the groups behind it were hoping. Then again, it's all still pretty hush-hush, so who really knows.

The concept of airport privatization goes beyond the desire to access airport monies for non-airport purposes, such as funding City operations. Currently, the airport’s operations are defined by legislation that treats the airport itself as little more than a public sector utility restrained by outdated legislation.
 
Here’s how it was explained to me from a regional public sector official in these matters…
 
Let’s say the airport has an operating budget that leaves it with a maximized profit margin of roughly 6MM, and the airport recognizes revenues from aeronautical operations that include takeoffs, landings, and gating fees. These fees are assessed to airlines at the start of a year. Now, say the airport recognizes 7MM in profits for the fiscal year. By its charter, the airport then must refund 1MM (7-6) to the airlines that fly out of there, based off of the beginning-of-the-year prices, essentially negating any revenues outside of its operating profit margin maximum of 6MM. On the flip side, say there’s another year where profits underperform estimates, like 5MM. Then, the airport has to assess 1MM in additional fees, in arrears, to its customer airlines that fly out of there, again returning to a mandated profit margin of 6MM. I believe the airport budget itself gets adjusted for inflation, but the profit margin threshold largely it stays the same on a year/year basis.
 
This is the problem with the airport: by its current charter, it is locked into revenues set to maximize profitability. Despite attempts to have this charter language changed, it’s nearly impossible. It’s not just that changing charter language would have to pass the City’s Aldermen, who respectfully are not knowledgeable about the convoluted budgetary operations of the airport. Changing a charter means that all current non-passenger customers of the airport (such as passenger airlines, cargo airlines, and other private and public sector tenants) must all agree to any changes in operations; a non-unanimous vote dooms whatever new charter would be proposed. And, with most changes that could’ve been proposed, at least one non-passenger customer of the airport would believe they would lose out on the proposed changes being implemented, and they’d not support the measure. Meanwhile, the risk of changing the charter repeatedly means that there’s uncertainty in the airport’s operational viability, that too many attempted changes would hurt the airport’s relationship with its non-passenger customers by making year/year operational parameters volatile. Too many failed efforts to change the foundation of airport operations, and the airport loses customers.
 
As gregl mentioned, the City is currently unable to access monies from airport revenues for non-airport operations. This is true.
 
As jshank83 mentioned, it would be nice if the airport could use monies from its own revenues to fund itself, say for reinvestment, rather than have it siphoned off to non-airport (City) uses. But, because of its charter language, it must refund excess profits to its existing non-passenger customers and continue budgeting itself largely for just operations, shown above at the estimated maximized profit threshold of 6MM.
 
Privatization would allow for an effective change in the charter without having to necessarily take it before the Board of Aldermen (and the risk that they’d want any proposed new legislation settled by a public vote from a less-than-informed, disinterested constituency). Meanwhile, the City would not have to worry about annual revenue generation from a managed asset it oversees; instead, they’d have annuitized revenue streams from the private sector operator or operators, as well as the initial lump-sum payment somewhere greater than a billion dollars. That’s a lot of City debt that’d go away (bonds, pensions, etc.) and a lot of initiatives (schools, law enforcement, economic development / urban renewal, etc.) that could be funded.
 
Concurrently, the airport operator – wanting to generate positive revenues from aeronautical operations – would want to maximize airport efficiencies, leading to multiple investments in the airport itself without having to be constrained by the charter’s existing 6MM profit threshold. By being allowed to seek positive revenue growth from aeronautical operations, we could reasonably anticipate increased flights and routes; perhaps with larger airliners servicing the airport; and perhaps recognizing comparable increases in cargo operations (which would recognize more pronounced fees for takeoffs and landings than passenger aircraft).
 
The big risk to privatization, however, is getting all the airport’s non-passenger customers to accept the privatization offer. Like I had written above, any successful offer must first have the support of every customer of the airport. Should one not agree, then it doesn’t pass. Any offer must be accepted unanimously by all the airport’s customers. If that happens, honestly, it likely must be a damn good deal. But, even if a damn good deal is finally proposed, it doesn’t necessarily mean that every airport customer would sign-off on it. This is a lot more difficult than we recognize, getting all the clocks to ring at the same time.

Meanwhile, I firmly believe that the best way to improve Saint Louis is by improving the airport. It has too much debt, has a lot of excess capacity, and could definitely service more routes. When companies look at a region for setting up new operations, they look at the region's airport and where it flies. We have an airport that has way too much debt, forcing it to assess very high fees for takeoffs, landings, and gating. High fees are prohibitive to airlines from expanding operations here, and even harder attracting new ones. With less flight options, we are less attractive to companies who need to send their people to multiple other markets to conduct business. Less companies, less employment, less tax revenues. More decline. Consider that one of the biggest reasons Clayco relocated to Chicago was not for the architecture of Chicago, but for the operational effectiveness of O'Hare International Airport. Both Caterpillar and Archer-Daniels-Midland relocated to Chicago because of ORD. A big reason Amazon didn't include Saint Louis in their top-20 prospect markets was because of the airport. If we want to get jobs and new companies here, we need to improve the airport, and that likely must come through a charter change. 

I'm not stating here that I'm 100% for or against privatization. But, I am absolutely for a change to the airport's charter language. If this can only be resolved through privatization, then so be it. 

Thanks for the informative post. A few questions if you know:

How often is the airport refunding profits in excess of 6M to the airlines? Or is this theoretical...

While there is outstanding debt, couldn’t they budget more for debt service if the profits were climbing?

The recent renovations and improvements at the airport - how were they incentivized?

From what I’ve read, the financial health of the airport is improving. Wouldn’t it fetch a much better deal if we worked on debt service for more time and made it self-sustaining?

Thanks

imran: I'm not overly educated on the current airport budgeting, so you'll pardon me for not being able to answer all that. The airport's fiscal health has been improving. 

As jshank83 wrote above, the airport has been reducing the fees it assesses towards gating; glad to hear they're now among the lowest in the country. Big props to Rhonda and her team for not only running the airport well but also for keeping focused on reducing its current debt load, including refinancing the big debts not so long ago. The less debt, the less that's reduced from revenues for servicing the debt, leading to lower fees, and making the airport that much more attractive to airlines who then expand services. 

Consider the fee reductions in arrears to be a regular thing as the airport improves its fiscal health. The better it does, the more likely it'll be rebating airlines for aeronautical expenses (gating, etc.), which hopefully leads to these airlines expanding operations & capacity (bigger jets, more gates, more flights, etc.) and making the airport more attractive to new carriers. This is all by the airport charter, which I would sure like to see changed into something far less restrictive.