Public-Private Partnership Policy Casebook/LaGuardia Central Terminal

Summary

In 1934, Fiorello LaGuardia, the famed mayor of New York City, boarded a TWA flight from Pittsburgh to New York City. However, once the plane landed, the mayor was surprised to find himself in Newark, New Jersey and not New York City. He refused to leave the plane and demanded to be flown to New York City or else. Finally the pilots flew him to Floyd Bennett Field in Brooklyn where Mayor LaGuardia disembarked from the plane and held an press conference on the airfield. Mayor LaGuardia decried the state of affairs that the largest city in the nation did not have an airport within its own boundaries, much less its own state. It was time that New York City must have its own, modern airport. This was the birth of what would become LaGuardia Airport.

Three years later in 1937, New York City, in cooperation with the Works Progress Administration, began construction of what was called the New York City Municipal Airport in Flushing, Queens. Two years later on October 15, 1939, the airport was dedicated by Mayor LaGuardia and commercial flights started later in December 1939. The airport's name was quickly amended to become New York City Municipal Airport-LaGuardia Field, before becoming LaGuardia Airport in 1947.

LaGuardia Airport has expanded over the years and continues to serve as a vital piece of the transportation infrastructure of the Greater New York area. However, the years have not been kind to the airport. Lack of maintenance, a confusing layout and the recent flooding caused by Hurricane Sandy in 2012 led Vice President Joe Biden to remark that LaGuardia looked like an airport in "a third world country" in 2014. It was clear that something had to be done to LaGuardia Airport.

During the years before the Vice-President's comments, the Port Authority of New York and New Jersey had been preparing to rebuild LaGuardia Airport as a public-private partnership. On May 28, 2015, the Port Authority announced they had chosen LaGuardia Gateway Partners as the private entity to rebuild, finance, maintain and operate the new Central Terminal Building at LaGuardia Airport. This case study will investigate the public-private partnership between the Port Authority and LaGuardia Gateway Partners. There will first be a list of the actors involved in the agreement, followed by a timeline of the events that have led to the signing of the agreement. Following this introduction, the political and economic context of the agreement will be discussed before the narrative of the case is elaborated and the financial structure of the deal is presented. Maps and other necessary diagrams will be presented as needed throughout these sections. Following the narrative of the case, the various policy issues surrounding the agreement will be presented and discussed before concluding. Questions that are raised by the case study that need to be answered and discussed are listed following the conclusion.

Annotated List of Actors

Public Entities

State Of New York

One of the two states that are members of the Port Authority of New York and New Jersey, a bi-state authority that currently maintains and operates LaGuardia Airport.

• Governor Andrew Cuomo- Governor of New York, elected in 2010 and the primary proponent of the plan to rebuild the Central Terminal Building at LaGuardia Airport.
• New York State Department of Transportation- current owners of the Grand Central Parkway, which borders the southern edge of LaGuardia Airport.
• New York City- the current owners and original builders of LaGuardia Airport, have leased the operations and maintenance of LaGuardia Airport to the Port Authority since 1947. The current lease will expire in 2050.
• Airport Advisory Panel- a seven member panel appointed by Governor Cuomo in January 2015 to advise him and the Port Authority on how best to modernize both LaGuardia Airport and John F. Kennedy International Airport. On July 27, 2015, their report, A 21st Century Airport for the State of New York: The New LaGuardia was released to the public.

State of New Jersey

One of the two states that are members of the Port Authority of New York and New Jersey, a bi-state authority that currently maintains and operates LaGuardia Airport.

Port Authority of New York and New Jersey

A bi-state agency created by the States of New York and New Jersey, along with the United States Congress, in 1921 and tasked with financing, building, operating and maintaining port and other transportation infrastructure in the New York area. Governed by a Board of Commissioners. Currently there are twelve members on the Board of Commissioners with each state's Governor appointing six of them. Currently operates multiple bridges, port facilities, a mass transit system and LaGuardia Airport, as well as four other airports in the New York region.

Private Entities

LaGuardia Gateway Partners

The special purpose vehicle created to be the private entity in the public-private partnership with the Port Authority. They will be in charge of demolishing Terminal B and building the new Central Terminal Building and adjoining structures. LaGuardia Gateway Partners is made up of the following partners:

• Vantage Airport Group- an equity partner. They are the party that is partially responsible for development and airport operations. They are also the group's president.
• Skanska Infrastructure Development- an equity partner. They are the party that is partially responsible for the development and construction of the project.
• MI LaGuardia CTB, LLC (Meridiam)- an equity partner. They are partially responsible for the development of the project.
• Walsh Construction- they are partially responsible for the construction of the project. They are not providing any equity.
• Parsons Brinckerhoff- they are partially responsible for the design of the project. They are not providing any equity.
• Hellmuth, Obata & Kassabaum- they are partially responsible for the design of the project. They are not providing any equity.
• Morgan Stanley and Company, LLC
• Citigroup Global Markets, Inc.
• Wells Fargo Bank, N.A.
• Pragma Consulting
• O'Melveny & Meyers
• Campbell-Hill Aviation Group, LLC

Delta Air Lines

The current leaser of terminals C and D at LaGuardia Airport. They are responsible for the maintenance and operations of these portions of LaGuardia instead of the Port Authority. Delta's terminals are not part of this private-public partnership, but they are expected to rebuild their terminals in a similar manner to the new Central Terminal Building in the near future.

Timeline

• 1934- Mayor LaGuardia refuses to get off his plane at Newark Airport, demands to be flown to New York and later calls for the City of New York to have its own airport.
• 1937- Construction begins on the New York Municipal Airport in Flushing, Queens.
• 1939- New York Municipal Airport- LaGuardia Field opens for service.
• 1947- Port Authority of New York and New Jersey assume operations at LaGuardia Airport.
• 1964- Terminal B at LaGuardia Airport is completed and opened in time for the 1964 New York World's Fair.
• 1983- Delta Air Lines opens Terminal D at LaGuardia Airport.
• 1992- Delta Air Lines opens Terminal C at LaGuardia Airport and builds a connection between it and Terminal D.
• 1995- Terminal A, also known as the Marine Air Terminal, is designated as a historic landmark due to its status as one of the oldest parts of LaGuardia Airport.
• October 26, 2012- The Port Authority issues a request for qualifications for the Central Terminal Building Replacement Project.
• July 26, 2013- The Port Authority announces four teams as prequalified to submit proposals for the Central Terminal Building Replacement Project and invites them to do so. The three teams are:
  • LaGuardia Gateway Partners- Vantage Airport Group Ltd., Skanska Infrastructure Development and MI LaGuardia CTB, LLC (Meridiam).
  • LGAlliance- Macquarie Infrastructure and Real Assets, Inc. and Lend Lease Investments, Inc.
  • LGA Central Terminal Consortium- ADP Management & TAV Havalimanlari Holdings A.S., GS Global Infrastructure Partners II L.P., GS International Infrastructure Partners II L.P.
  • Aerostar New York Holdings- Highstar Capital IV L.P. and Aeropuerto de Cancun S.A. de C.V.
• February 6, 2014- Vice President Joe Biden states that LaGuardia Airport looks like an airport "in some third world country".
• March 10, 2014- Aerostar New York Holdings is disqualified by the Port Authority and removed from the prequalified list of proposal submitters. The three remaining potential submitters are LaGuardia Gateway Partners, LGAlliance and LGA Central Terminal Consortium.
• October 2014- Governor Andrew Cuomo of New York announces that a competition for new master plans of LaGuardia and John F. Kennedy Airports would be held in order to determine how the airports would be modernized for the 21st century. An Airport Advisory Panel is created to review the submissions and use them make their final recommendations how to best develop the two airports.
• January 2015- Governor Cuomo appoints Dan Tishman as the chairman of the Airport Advisory Panel with the following members: Amanda Burden, Jose Gomez- Ibanez, Jackie Snyder, Tony Collins, Melinda Katz, John Zuccotti.
• February 25, 2015- The Port Authority delays its decision on their selection of private partner for the LaGuardia Central Terminal Building Replacement Project. They state their decision will come after the Airport Advisory Panel has more time to finish their final report. The bidders announced they would wait until April for the Port Authority's decision.
• April 2015- The Port Authority receives the initial recommendations from the Airport Advisory Panel.
• May 28, 2015- The Port Authority announces that they have selected LaGuardia Gateway Partners to be the private partner in the LaGuardia Central Terminal Building Replacement Project. The Port Authority states that LaGuardia Gateway Partners proposal was the one that was most consistent with the recommendations of the Airport Advisory Panel.
• July 27, 2015- Governor Andrew Cuomo and Vice President Joe Biden present to the public the findings of the Airport Advisory Panel. The full report, A 21st Century Airport for the State of New York: The New LaGuardia: A Report to the Governor from the Airport Advisory Panel: Guiding Principles for a Comprehensive Airport Master Plan is also released to the public.
• 2016- Expected date of financial close between the Port Authority and LaGuardia Gateway Partners.
• Early 2016- Planned date for demolition of the existing Terminal B and construction of the new Central Terminal Building to begin.
• Mid 2019- Major work on Central Terminal Building expected to be completed.
• 2021- Central Terminal Building Replacement Project is expected to be fully constructed and open for operations.

Narrative of The Case

In 2004, the Port Authority of New York and New Jersey (PANYNJ) embarked on a major modernization/redevelopment program to remedy the functional inefficiencies of the LaGuardia Airport Central Terminal Building, also known as Terminal B (the “CTB”). The LGA Redevelopment Program consists of two separate, but related elements - the CTB replacement project, which includes the design, finance, construction, maintenance and operations of a new CTB and related facilities, to be performed by a private consortium (or its designee) under a public-private partnership with the Port Authority (the “CTB Replacement Project”); and a capital infrastructure program, which includes the design, construction, and operation and maintenance of certain supporting facilities at the Airport, to be performed by the Port Authority or its contractors.

The Port Authority of New York and New Jersey (PANYNJ) released its request for qualifications for the LaGuardia Central Terminal Building Replacement Project in October 2012. Sixteen teams made up of contractors, equity members and other key firms responded to the authority's RFQs. The Port Authority issued the initial Request for Proposals (the “RFP”) for the CTB Replacement Project on August 28, 2013, and, after considering comments from various potential participants with respect to this initial RFP, the final RFP was released on April 24, 2014. PANYNJ then picked the following four teams to submit their request for proposals (RFP):

• Aerostar New York Holdings LLC, which includes Highstar Capital IV LP, Aeropuerto de Cancun S.A. de C.V.

• LaGuardia Gateway Partners, which includes Skanska Infrastructure Development, Tishman Construction Corp. of New York, Parsons Brinckerhoff, Meridiam, Hellmuth, Obata + Kassabaum PC, and Vantage Airport Group Ltd.

• LGAlliance, New York, which includes Lend Lease (US) Construction LMB Inc., Macquarie Capital Group Ltd., and Hochtief AirPort GmbH

• LGA Central Terminal Consortium, which includes STV Inc., ADP Management & TAV Havalimanlari Holding A.S, GS Global Infrastructure Partners II, L.P. and GS International Infrastructure Partners II, L.P.

Proposals from only three of the above teams were received on May 20, 2014. The Aerostar was disqualified in March 2014. The Port Authority reviewed and evaluated the proposals over an approximately five-month period. Based on such review, in October 2014 staff formulated a recommendation with respect to the selection of a preferred proposer, based on a best-value determination.

The Port Authority was expected to select a winning team in the fall of 2014 but the decision was delayed after New York Gov. Andrew Cuomo in October launched a competition to redesign La Guardia and other New York airports.

In January 2015, Governor Cuomo created a seven-member panel to advice the Governor and the Port Authority of New York and New Jersey (PANYNJ) on the modernization of LaGuardia.

Andrew Cuomo’s Panel consisted of seven individuals:

• Chair - Dan Tishman (Vice chairman at AECOM Technology Corporation and Chairman and CEO of Tishman Reality and Construction)
• Amanda Burden (former NYC Planning Commissioner and current principal at Bloomberg Associates),
• Tony Collins (Co-Chair for the North Country Regional Economic Development Council)
• Jose Gomez-Ibanez (Professor of Urban Planning and Public Policy at Harvard’s Kennedy School of Government and Harvard’s Graduate School of Design)
• Melinda Katz (Queens Borough President)
• Jackie Snyder (Special advisor for infrastructure for New York State and the former head of the NYC Design Commission)
• John Zuccotti (Co-chairman of Brookfield Office Properties and chairman of the board of directors of Brookfield Financial Properties LLC)

In April 2015, the Port Authority of New York and New Jersey (PANYNJ) Board received a series of preliminary recommendations from the Advisory Panel related to LaGuardia Airport, and the actions being taken today incorporate a number of elements of those preliminary recommendations, and represent the first phase of a holistic Master Plan for LaGuardia Airport. Cuomo’s panel’s recommendations were inspired by Governor Cuomo's charge not just to remodel or rebuild the existing facilities. The Advisory Panel focused on a comprehensive vision for the airport that has been lacking over the decades of its prior development. The Advisory Panel also put a focus on putting passengers first and improving their experience, starting with ow they get to the airport.

In May 2015, the Port Authority's Board of Commissioners voted to select LaGuardia Gateway Partners to develop a $3.6 billion world-class facility to serve approximately 50% of the passenger volume at LaGuardia. It should be noted that this vote was consistent with the recommendations of New York Governor Cuomo’s Airport Advisory Panel. The LaGuardia Gateway Partners

At the June 25, 2015 Port Authority of New York & New Jersey board meeting, the Board authorized certain contract awards and expenditures for Program Delivery Services in connection with the New LGA Redevelopment Program (Program) and to support the integration of the New Terminal B Project with other ongoing construction projects at the airport.

Construction on the first half will begin upon final approval from the Board of Directors of the Port Authority of New York and New Jersey. That approval is expected in the first part of 2016; the majority of this first half of the project is expected to open to passengers in 2019, with full completion scheduled for approximately 18 months later.

Project Overview

The new LaGuardia Airport airport would consolidate four terminals into one, connect the facility to the New York City subway system, create more space for airplane taxiways and add a hotel. The new terminal will allow for expanded taxiway area to ensure that airplane movements on the ground are more efficient. The key elements of the work are the complete rebuilding of the terminal and airport buildings and the establishment of a high-speed ferry and an AirTrain station that will be connected to the NYC subway system at Willets Point. The LaGuardia Airport redevelopment program consists of two phases.

Why is it Being Done?

The Central Terminal Building at LaGuardia Airport is both old and overcrowded. Opened in 1964 for that years World's Fair, the CTB was last renovated in the 1990s and today handles many of the 24 million passengers that use the airport. It is estimated that even without taking any action today, by 2030 almost 17.5 million passengers will use the CTB, almost double the amount of passengers that the building was designed for. The current design of the CTB was built for a simpler time in aviation and therefore does not have enough floor space to meet all Transportation Security Administration standards for personnel accommodations, screening processes and baggage checking equipment used today. In addition to the CTB itself, the parking garages that support the airport are also nearing the end of their lives and need to be replaced as well as several pieces of the utility infrastructure, some of which date back to the 1930s when the airport was first built. Finally, the airport ramp, the area where planes board and disembark passengers at the concourses, was designed in the 1960s when planes were smaller than they are today. This means that today's larger, quieter and more efficient aircraft are unable to access the CTB due to size constraints. The design also hinders the smaller planes that currently use the airport as they are unable to power into and out of positions at the concourses under their own power, necessitating the use towing equipment, which wastes time, money and resources.

What is Being Built?

Phase 1 – Construct a new Terminal B (Central Terminal) with Central Arrival and Departure Hall. Current airlines who operate out of Terminal B (CTB) include the following:

• Air Canada
• American
• Frontier
• Jet Blue
• Southwest
• United
• Virgin American

Phase 2- Redevelop Terminals C & D and Connect to Central Arrival and Departure Hall. This phase will be completed by Delta. No time table is set for the competition date for this phase. Delta’s current lease at Terminals C & D expires in the next two years. It should be noted that the airline and the port authority will have to negotiate a deal.

The New LaGuardia Airport Redevelopment Program consists two major subprojects the LGA Capital Infrastructure Renewal program (LGACI Program), the cost of which is currently forecast at $1.1 billion, and the New Terminal B Project, to be implemented through the public-private partnership (P3).

The LGACI Program is a collection of projects that address short- and long-term infrastructure needs at LGA, such as utility and electrical infrastructure, parking, roadways, bridges, and select building demolitions. Projects under the LGACI Program are required to maintain a will invest about $190m on the East Parking Garage and East End Substation project. The East Parking Garage will involve an investment of $82.9m. The runway modernization will cost $202.9m.

The New Terminal B Project provides for the design, finance, construction, maintenance and operation of a new Terminal B and related facilities, to be performed by LaGuardia Gateway Partners under the public-private partnership (P3). The plans for the New Terminal B call for a new 35-gate facility with more restaurants, stores, bigger gate areas and improved passenger and baggage screening. The redesigned facility will use a system in which passengers get to their gates through raised pedestrian bridges, helping to create more space for planes to taxi and ensuring fewer delays. The new CTB will also feature 214 check-in counters and kiosks, baggage handling systems with a centralised in-line, a baggage screening facility, and 1,620ft of baggage claim device presentation frontage.

LaGuardia Gateway Partners – DBFOM (P3)

• Structural Demolition – Abatement, deconstruction and removal of the following structures is necessary to make way for the new CTB: Existing CTB, Hanger 1, existing CTB P2 parking garage, departures level roadway bridge structures, and the decommissioned Central Electric Substation.
• Construction of temporary facilities to support passenger services during construction of the replacement CTB (new CTB).
• CTB Replacement – Approximately 1.3 million square foot with 35 building contact gates, expandable to 38 gates and associated aircraft apron and Frontage Roads.
• CTB Central Entry Portal – Create a unifying architectural experience that links terminal B and C for the first time, contains amenities and retail for entering and transiting passengers, and accommodates the future development of the following elements: people mover, air train station, and a hotel and conference facility.
• CTB Apron Modifications – 35 new aircraft apron gates, supported by a taxi lane system with multiple startup positions and overnight parking accommodations for aircraft, adjacent to the new terminal and integrated with the existing taxiway configuration.
• Frontage Roads – Includes a multilevel bridge for departures and arrivals traffic, adjacent to the new CTB, with a high occupancy vehicle (HOV) lane at grade roadway below.
• Utilities on CTB site– telecommunications, water, natural gas, sewer, storm and electric service connections to the new CTB.
• Central Heating & Refrigeration Plant (CHRP) – A new three story stand-alone structure that will house chillers, hot water generators and other equipment to replace and upgrade the current plant that serves the existing CTB.
• Hydrant Fueling – Includes the installation of underground fueling infrastructure within the new CTB ramp area in order to support the implementation of a future hydrant fueling system at LGA.
• Operation, maintenance and management of the existing CTB and temporary facilities during construction, the new CTB and CHRP.

LGA Capital Infrastructure Renewal Program (LGACI Program) - Funded and managed by the Port Authority of NY & NJ (public)

• Demo Hangars 2 & 4
• Construct new East End Substation
• Construct new East Parking Garage
• Construct Utility Trunk Line at East and West

Who Has What Responsibilities and Risks?

Port Authority Responsibilities:

• Airport Operator
• PFC funding
• Airport infrastructure funding
• Obtain environmental approvals
• Approve design/construction submissions
• Relocate airport-wide functions out of existing CTB

LaGuardia Gateway Partners:

• Complete construction at fixed price on schedule
• Provide additional funding including equity
• Operate and maintain Project for 35-years
• Pay annual rent plus revenue share
• Manage all airline driven changes
• Negotiate all New Terminal B subleases
• Perform life cycle improvements and return the Terminal at the end of the Lease term in required condition

Where is the Financing/Funding Coming From?

The equity for LaGuardia Gateway Partners part of the LGA Redevelopment Program will come from three companies:

• Meridiam
• Vantage
• Skanska

The debt financing for the LaGuardia Gateway Partners part of the LGA Redevelopment Program will come from two companies:

• Citigroup Global Markets
• Wells Fargo

The exact details of the amounts invested by all above listed partner companies will not be official until the financial close is complete. The expected date of financial close between the Port Authority and LaGuardia Gateway Partners is scheduled to occur in the early months of 2016.

How Long is the Deal Going to Last?

The deal will last 35 years or until 2050. LaGuardia Gateway Partners will operate and maintain the new CTB (Terminal B) Project for 35-years and then turn over the new CTB to the Port Authority of NY & NJ.

Policy Issues

Design Issues: How much power should another public entity have over the design of a Private-Public Partnership?

When the Port Authority of New York and New Jersey (PANYNJ) released its request for qualifications for the LaGuardia Central Terminal Building Replacement Project in October 2012, they expected to finish the selection process by the end of the fourth quarter of 2013. Instead, the decision was made during the second quarter of 2015. While delays are not unknown during request for proposals, one striking feature of this delay was that the project that was outlined in the RFQ and Briefing Book in 2012 only bears slight resemblance to the project that was announced in 2015, after PANYNJ took into account the suggestions made by Governor Cuomo's Airport Advisory Panel.

The initial plans for the project was for the new Central Terminal Building to be the only portion of LaGuardia to be rebuilt. Terminals C and D were going to be connected to the new building, but not rebuilt. In addition to this more limited aim, the design for the aircraft concourse piers, where the planes would dock and passengers embark and disembark, was relatively conventional. Two piers with a 48 foot wide central concourse and 25 foot wide holding rooms on either side would jut out from the Central Terminal Building where planes would dock. The project overall would resemble the piers used in the newer sections of Reagan Washington National Airport.

The design presented by the Airport Advisory Panel, while similar in structure, included two major departures from the RFQ. First, the entire airport, including Terminals C and D would be rebuilt as a single unified structure, though the Central Terminal Building would remain a separate project and be the sole focus of the private-public partnership. Second, the design of the piers would be changed dramatically. Instead of the traditional style piers envisioned in the RFQ, the new piers would use an island-gate system. In this system each of the four piers (two at the Central Terminal Building and one each at Terminals C and D) would be an island, completely separate from the main terminal building. They would be connected to the terminal building by bridges that would be high enough to allow aircraft to pass below them and access all sides of the island.

While it is difficult to determine how much the Airport Advisory Panel delayed PANYNJ's decision, it is known that when they decided to delay their decision in February 2015, the reason they gave was due to the Airport Advisory Panel. Once they received the Panel's findings, they made their decision and stated that the final design would be consistent with the recommendations of the panel.

Economic Issues

Delta Airlines, which operates terminal A of the LaGuardia airport, will renovate its terminal. Most recently, Delta Airlines announced a September quarter profit, with an adjusted pre-tax income of $2.2B, with an adjusted earnings of $1.74 per diluted share, “Delta returned $532 through dividends”. This choice has proved to be a sound choice for Delta Airlines.

The LaGuardia Gateway Partnership will provide capital equity financing. Equity is the most expensive form of financing; typically, debt is cheaper than equity. Additionally, debt is repaid first, before equity is repaid. The benefits of the P3 model are that the private sector absorbs cost overruns. One economic challenge to this P3 is revenue risk. The LaGuardia reconstruction project does not seek to expand runway capacity. Limited runway capacity may reduce the number of planes that the airport can manage, thereby limiting revenue. However, revenue may be generated from flight ticket taxes, concessions, and airline companies. The LaGuardia Gateway Partnership must account for the demand and revenue risk is its financing structure, so as no to fall prey to optimism bias.

Most importantly, LaGuardia faces demand risk from its low popularity, and poor reputation. For instance LaGuardia was voted the Worst Airport in North America 2015, a recent poll cited “ The terminals seem to grow more decrepit each year (…) long queues manned by unfriendly staff” The remodel is not a guarantee for improved demand. Additionally, the proposed AirTrain project should be completed before the renovation project is complete in order to improve convenience of travel from Queens to Manhattan.

The delays and redesigns caused by the Airport Advisory Panel does raise the question of if the Port Authority is in complete control of their own public-private partnership. While both the Port Authority and LaGuardia Gateway Partners may have the same goals and aims for the project, they might not entirely line up with those of the Airport Advisory Panel, which adds uncertainty to the project and therefore increased costs.

Airport Privatization: Is LaGuardia an example of this?

In 2014, one of the groups in the public-private partnership policy class did a case study on the recent privatization of Luis Munoz International Airport in San Juan, Puerto Rico. Privatized in 2013, it was hailed as the first successful privatization of a large scale commercial airport in the country under the Federal Aviation Administration's Pilot Program for Airport Privatization. While both the public-private partnership that privatized Luis Munoz International Airport (a finance, operate, maintain and improve partnership) and the public-private partnership that will build the new Central Terminal Building at LaGuardia Airport (finance, design, build, operate and maintain partnership) appear to be very similar, the LaGuardia CTB project is not being developed under the FAA's Pilot Program for Airport Privatization. This does not mean that at a future time it could be. The current operator of LaGuardia Airport, the Port Authority, has experience with airport privatization, having privatized its operation at Stewart International Airport in Newburgh, New York in 2000. They resumed operation of Stewart International Airport seven years later.

Sustainability and Climate Change: What to do after Sandy?

In 2012, Hurricane Sandy caused tremendous damage to the states of New York and New Jersey in general and LaGuardia Airport in particular. The airport's runways were flooded with over 100 million gallons of seawater. The airport was closed for two days, impacting 250,000 passengers and creating an economic loss of $108 million for the region. It also served as a warning that for LaGuardia, located on Flushing Bay, this could and probably would happen again in the future.

The RFQ issued by the Port Authority was sent out on October 26, 2012, just days before Hurricane Sandy made landfall. Yet it included provisions that would help the airport survive another storm like Sandy, including having the East End Substation and the Central Heating and Refrigeration Plant, which would provide power, heating and air conditioning to the entire airport, on the landward side of the airport, located between Terminal C and the Grand Central Parkway. The Airport Advisory Panel further recommended that other critical infrastructure is elevated and protected in case of another storm like Sandy. However, it should be noted that the Airport Advisory Panel's suggestion of relocating and rebuilding Terminals C and D would place them where the East End Substation and Central Heating and Refrigeration Plant are supposed to go.

Community Interests: What about East Elmhurst?

New York City is the largest city in the United States. This means whenever something is constructed or rebuilt, communities throughout the city, especially those near the site, are going to be impacted. The LaGuardia Airport Central Terminal Building Replacement Project is no exception. It is estimated that more than 600,000 people and 50 schools are located within five miles of LaGuardia.<Ibid., 11.</ref> The East Elmhurst neighborhood is located across the Grand Central Parkway from the airport.

The impact of the project on the local community was a major interest of both the Port Authority and the Airport Advisory Panel. Parking on the local streets by those waiting to pick up people from LaGuardia has always been a problem in East Elmhurst. The Port Authority recognized this and in the RFQ included the construction of a new 2,800 spot parking garage as part of the project. The Panel approves of this action, but suggests that it be increased to 3,100 spots. They also suggested the creation of a designated cell phone waiting area for pickups.

In addition to the parking problems created by LaGuardia Airport, noise caused by planes taking off and landing at the airport continues to be a problem for local residents. For years there has been a perimeter rule in effect at LaGuardia Airport, limiting flights to destinations that are less than 1,500 miles away. This was done partially to reduce noise, as was the rules that prevent aircraft from taking off or landing from LaGuardia during the hours between midnight and six in the morning. The RFQ made no comment on these restrictions, other than making the qualified proposers aware of their existence before they submitted their plans. The Airport Advisory Panel, while sympathetic to the local residents concerns, stated that they felt that the new LaGuardia Airport should be built large enough to accommodate larger aircraft if the perimeter rule was removed sometime in the future.

Community Stakeholders and M/WBE firms

The LaGuardia Central Terminal Building Replacement project has support from Governor Cuomo. However, the LaGuardia Gateway Partnership needs to earn the trust and political support from local political leaders including, State Senator James Sanders (D), and U.S. Rep. Gregory Meeks (D-Jamaica). There are political risks from the lack of inclusion minority and women owned enterprises (M/WBE) in the equity of the project. It is important to have local political support too, as the City of New York owns the asset, the LaGuardia airport. “It is important to include and acknowledge community interest too”, State Sen. Jose Peralta (D-East Elmhurst).. The local community stands to gain economically from increased employment oppourtunities. Queens has a high unemployment rate for minorities, 6.8% compared to Whites at 3.4%.

There is a small opportunity for minority enterprise inclusion in the equity financing to the LaGuardia Central Terminal Replacement project. On October 6, 2015, MPAC (Mobilizing Preachers and Communities) met with representatives from Gov. Andrew Cuomo’s office to discuss the lack of equity from minority and women owned business in the project. Specifically, MPAC wants “prime level” inclusion of MWBE,. To that end, MPAC is supporting Transportation Consortium of New York as a potential equity partner, capable of contributing $60M in equity. Additionally, the Transportation Consortium of New York includes Switzer Group and Manning Architects, which help to design the Dallas and Atlanta airports.Additionally, Skanska was investigated for practices that disadvantage MWBE (Minority and Women-owned Business Enterprise) in 2011, and paid $19.6M to the U.S. government. Skanska was not found guilty, but settled with the U.S government according to Elizabeth Miller, Skanska Communication Director for the N.E. region.

Governor Cuomo has expressed support for MWBE's; he wants to ensure that 30% of the contract and subcontracts go to New York based minority and women owned enterprises.. MPAC leaders do not want minority owned business to be relegated to the subcontractor level. However, no contractors can be decided upon until the official financial closing which has yet to be concluded. Minority inclusion is important to the Port Authority, as stated in its ADCBE (Airport Concession Disadvantaged Business Enterprises) goals.

PPP projects need multiple political champions; Governor Andrew Cuomo provides support from the State level, U.S. Representative Joseph Crowley (14th-Congressional District) provides support at the national level, and State Senators James Sanders (D-10th Senate District) and Jose Peralta (D-13th Senate District) provide both local community and State support. The Port Authority is the lessor of the Guardia Airport. The LaGuardia Central Terminal Replacement project has support from Patrick Foye, the Port Authority Executive Director.

The LaGuardia Central Terminal Replacement project will cost $3.6B, with $1B provided via public funds and $2.5B provided via LaGuardia Gateway Partners. However, only 18,000 jobs (8,000 direct jobs, and 10,000 indirect jobs) will be created. Moreover, the LaGuardia airport currently adds $16B in economic activity, and provides 121,000 jobs directly.

Potential Additions: When is it Really Done and Does It Need a Hotel?

When the construction ends on the LaGuardia Airport Central Terminal Building Replacement Project, it will not be the end of all expansion at the site. Even though not a single shovel of dirt has been turned, already future plans for LaGuardia are being made. The biggest is the construction of a rail connection between the airport and the New York City Subway. LaGuardia Airport is currently the only major airport in the New York region that is not connected to the subway or commuter rail system. Already John F. Kennedy International Airport and Newark Liberty International Airport have AirTrains connecting the terminals directly to commuter rail and subway stations. Both the Port Authority and the Airport Advisory Panel support this plan. The RFQ included information on the current right of way that has been reserved for the construction of a rail connection to the airport and how it would connect directly with the completed Central Terminal Building. The project also has the support of Governor Andrew Cuomo. In addition to a rail connection between the airport and the city at large, the Airport Advisory Panel recommended that the airport be designed to include a business and conference center as well space for the potential construction of a "200 room boutique hotel" at the airport itself. Neither the hotel or conference center are discussed in the RFQ.

Discussion Questions

1. What is the appropriate level of involvement for Governor Cuomo's Airport Advisory Panel? How might the panel's vision (which differs from the initial RFP) effect the outcome of the LGA Central Terminal Building Replacement Project?

2. Will this PPP overcome overcome the limitations of the facilities ( lack of expanded runway space, lack of exhausting AirTrain connection to subway) at LGA?

3. Is the revenue risk transferred to the appropriate party, ( LaGuardia Gateway Partners, Port Authority of New York and New Jersey, the airlines, the customers)?

4. How does this PPP illustrate the importance of a political champion?