| PEPA - Purchase Environmental Protective Association

Airport Overview: Special Edition PEPA Perspective

Wed, Jan 18, 2017 • Westchester Airport

Proposals for significant changes at the Westchester County Airport have been in the headlines for over one year now. In November 2016, Executive Rob Astorino surprised the Westchester County Board of Legislators by proposing a long term operating lease of the Westchester County Airport by a private company (Oak Tree Capital Management). Subsequently, the Westchester Board of Legislators embarked on an evaluation of the proposed lease through its various committees.

To assist the Board in its deliberations, PEPA was invited along with a few local municipalities that border the Airport to participate in a meeting on November 28^th, 2016 at the Legislature's Offices in White Plains. Martin Rogowsky spoke on behalf of PEPA at the meeting. As you may recall, PEPA retained the services of former Legislator Rogowsky, who ran for election on a platform opposing expansion of Westchester County Airport and represented the "airport communities" for 13 years, when legislation was presented to the Board of Legislators to modify what the Terminal Use Agreement (last March). Since then, Mr. Rogowsky has continued to advise and assist PEPA in gathering the necessary information that PEPA needs to properly analyze proposals at the Airport.

Mr. Rogowsky read a statement on behalf of PEPA at the November 28^th meeting, explaining that PEPA is majorly concerned about the:

time constraints of reviewing this lease
conflict of interests of CIBC (a publicly-traded Canadian bank involved in the deal)
lack of an RFP process,
need to establish the value of the property
lack of coordination of activities with a master plan

Mr. Rogowsky also pointed out that the current airport is a spoke and not a hub. Further, PEPA is concerned whether this lease can address issues that the current public private partnership cannot do as well as issues raised about future decision making and oversight.

Additionally, PEPA is working with David Gelfarb our Westchester County Board of Legislator representing District 6; Harrison, Rye Brook, and Port Chester. David has demonstrated to PEPA that he is diligent in following matters concerning the Airport and raising the concerns appropriately as our local Legislator!

Mr. Gelfarb sent a newsletter last month about the proposal currently before the Westchester County Board of Legislators for the County to enter an agreement to lease the County Airport for 40 years to Oaktree Capital Management. It provides an excellent overview and summary of the Oaktree proposal, and we are happy to be able to share this excerpt with our members.

From the Office of Legislator Gelfarb

"Dear Friends and Neighbors,

Many of you have heard about a proposal currently before the Westchester County Board of Legislators for the County to enter into an agreement to lease the County Airport for 40 years to Oaktree Capital Management. The Board became aware of the proposal less than a day before it was publicly announced by the County Executive on November 3^rd. The Board immediately began reviewing the lease for potential inclusion in the 2017 budget. The goal of this proposal is to take advantage of what is known as the FAA Pilot Privatization Program, a program that was enacted by Congress in the 1990s. Currently, the only significant domestic airport operating under this program is Luis Munoz Marin in Puerto Rico. Among other requirements for enacting a Pilot Privatization Program, the airlines utilizing the Airport must approve of the privatization agreement.

Under federal law, all revenues earned by the Airport must remain at the Airport and cannot be used for County operating purposes. In other words, whatever money the Airport earns, stays at the Airport. However, under the Pilot Privatization Program, the County would be able to access Airport revenues. At this time, the County pays about $1 million per year for a manager to operate the Airport.

The basic terms of the potential agreement are as follows:

Oaktree would lease and operate the Airport for 40 years.
The County would receive the following:
- $130 million at the closing;
- $20 million at closing as reimbursement for the Airport Fund Balance;
- $4.9 million annual payment for the term of the lease as reimbursement for security costs;
- $3.7 million payment in years 1-5;
- In years 1-15, a fixed dollar amount for revenue sharing increasing from $190,000 to $750,000; and
- Variable percentage of gross revenue starting at 2.50% in year 1 and increasing to 11.50% in year 40.

You may remember that about one year ago, legislation was presented to the Board of Legislators to modify what is known as the Terminal Use Agreement. The TUA governs operations at the Airport by restricting the number of passengers that can enter and exit planes flown by scheduled airlines every half hour. The proposed legislation sought to change those limits from a half hourly basis to a daily basis. In other words, the idea would have been to change the limits from 240 passengers per half hour to 11,520 passengers per day. I spoke out at many meetings of the Board of Legislators about my concerns about the impact of those changes on noise, storm water runoff, ground traffic, and the impact of any change on our continuing ability to maintain restrictions on Airport operations. Ultimately, the proposed changes to the TUA were never enacted. I also sent a letter to you about TUA developments in March, 2016. I am equally committed to ensuring that the proposed lease be given the same level of scrutiny to determine if it is in the best interests of my constituents, County taxpayers, residents, airport passengers and businesses that use and are based at the Airport.

As Chair of the Labor, Parks, Planning and Housing Committee and a member of the Budget & Appropriations Committee, I have attended several meetings, and have been a tenacious advocate in addressing the concerns of my constituents, including potential issues regarding noise, groundwater and traffic. I am also a member of the Airport Advisory Board, and attended a meeting of the Advisory Board, on November 16th where I extensively questioned, for well over an hour, representatives of Oaktree regarding the impact of the proposed agreement on our community as well as the business terms of the transaction. I questioned them further at the meeting of the Budget Committee on November 21st, which can be viewed here. I conducted further discussions with Oaktree at a caucus meeting on November 28th. The proposed lease will maintain the restrictions set forth in the TUA, including, critically, the passenger limits and the number of gates. Oaktree is also barred from expanding any runways or building new buildings at the Airport.

At this point, there are several concerns about the proposed transaction. The most important are the following:

Oak Tree did not engage in competitive bidding or respond to a Request for Proposals. As I mention below, it appears very likely that a Request for Proposals for public-private partnership for the operation of the Airport will be issued. There may be a lot of bidders who are interested. It is also possible that no other entity is interested. If an RFP is issued, we will find out how much interest there is and whether the County can realize a better deal.
In all likelihood, Oak Tree will cash out its interest long before the 40 years are up. Thus, there is concern about who Oaktree will sell to, and whether that entity will do a good job in running the Airport. A related issue, which is of great concern to me, is whether the County should share in any profit from a sale of Oaktree's interest. Of course, if the County were to share in such profits, a bidder may be inclined to offer less cash up front.
What steps will Oaktree take to increase revenues, profits and in general to recoup its investment and satisfy its investors? It appears that Oak Tree's revenues will come from the following sources:
- Fuel sales;
- Parking garage;
- Retail (including better food service) and advertising;
- Car rental leases;
- Landing fees for commercial airlines; and
- Lease agreements with fixed base operators and private jet operators.
Potential environmental impacts, especially if there is more activity at the Airport:
- Noise;
- Ground traffic;
- Watershed and reservoirs;
- Deicing facilities to be utilized and deicing protocols to be followed. There have been media reports that Oak Tree would attempt to build a treatment facility to capture and treat deicing fluid. Whether this would be better for the neighborhoods in Rye Brook that experience odors from deicing runoff, and the financial impact on the Blind Brook Sewer District, are issues that will have to be addressed.
Whether the proposed lease is too long.
How, if at all, a transaction would impact the voluntary curfew that is in effect in the overnight hours.
Oak Tree is committed to spend approximately $30 million dollars on capital improvements at the Airport during the first five years of the Agreement. We need a better understanding of what capital improvements Oak Tree intends to make and what degree of control the County has over such improvements.
Again, it appears very likely that the County will issue a Request for Proposals. In fact, on December 12th the Board of Legislators enacted a resolution stating that the Board and the County Executive commit to developing and issuing a Request for Proposals. I expect an RFP will be issued within the next few months. If an RFP is issued, we will find out how much interest there is and whether the County can realize a better deal. The fact that the County issues an RFP does not mean that a deal will ultimately happen.

Because it very likely that an RFP will be issued, it is unlikely that the current Oak Tree agreement will proceed to a vote of the Board for several months, if ever. It is possible that we will receive better offers from other bidders. It is possible that Oak Tree itself will submit a different offer in response to the RFP, or may submit no offer at all. We just won't know the status of Oak Tree's offer until we see what other offers come in after the RFP is issued.

I will continue to keep you apprised of the progress of the Board's discussions. I can assure you that no decision will be made until we are satisfied that all of our questions have been answered and our concerns addressed satisfactorily."

Going forward, PEPA will continue to work with Mr. Gelfarb and Mr. Rogowsky to monitor this Pilot Privatization Program proposal as it wends its way through the Board of Legislator's committees. We will keep all our members up to date as new issues develop and should the County take additional steps regarding this program.

Finally, thank you for those who contacted PEPA to share information, questions, and concerns about the airport. We look forward to continuing to work together to protect our community. If we can be of assistance please reach out via email agold@pepany.com or phone (914) 960-3088.

KEY LINKS

Recent Airport News in case you missed these recent articles that included Westchester County Airport news:

PEPA Airport Articles:

Airport Overview: Special Edition PEPA Perspective

From the Office of Legislator Gelfarb

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