The 40-year lease deal is meant to improve service, maintain airport size, strengthen environmental safeguards and save taxpayer money.
HARRISON, NY — Plans to run Westchester County Airport as a public-private partnership were announced today by Westchester County Executive Robert P. Astorino.
Astorino stressed six advantages in his announcement: save taxpayers more than $140 million, improve the overall passenger experience, energize the local economy, and strengthen environmental protections, all while maintaining the current footprint of the airport and preserving the quality of life of the surrounding communities.
The plan is made possible by Westchester’s eligibility in a Federal Aviation Administration program that allows small to mid-sized airports to be run as public-private partnerships, he said.
It would be structured under a 40-year revenue-sharing lease with Oaktree Capital Management, L.P. (“Oaktree”), whose record includes the successful completion of similar projects in Baltimore, Puerto Rico and London.
Backed by key airline tenants, including JetBlue, American and United, the plan would keep in place the current limits on passengers, the footprint of the terminal and the hours of operation. The number of gates at the airport would remain at four. There would be no addition of new runways or extensions of existing runways.
“The driving force behind this proposal is simple – unlock millions of dollars of value that have been created at the airport and put this idle money to work in ways that benefit everyone who lives, works and visits Westchester,” said Astorino. “We are creating a reliable, long-term source of funding that will assist taxpayers, help pay for parks, police, day care and all of our other services, and enhance the passenger experience at our airport, and doing all of this without changing the current character of the nearby neighborhoods. This is smart government adapting to the future, while protecting the present and past.”
The transaction will require the approval of the Federal Aviation Administration (FAA). The Westchester County Legislature must also approve the lease agreement.
The public-private partnership between Westchester County and Oaktree, known as a P3 under the FAA program, is not a sale, Astorino stressed. The airport will continue to be owned by Westchester County and will continue to be privately managed, as it has been since the end of World War II. What is changing is that Oaktree will be the new manager and that by structuring a new lease in accordance with the terms of the FAA program, money paid to the county by Oaktree can be used for all county programs. Until now, any revenue generated at the airport could only be used at the airport.
“Westchester is building on a national trend towards delivering the airport improvements and innovation this country needs,” said Emmett McCann, managing director at Oaktree and lead for the firm’s airport efforts. “By utilizing the strong demand for stable long-term infrastructure investment, creating a best-in-class passenger experience, and successfully aligning the interests of all stakeholders, the county is enhancing the local economy and creating jobs without placing a further burden on the airport’s neighbors and local taxpayers. We expect this project to serve as a model for similar airports across the country.”
The three county employees who work at the airport will have the option to remain with county government or pursue opportunities with Oaktree. AvPorts, the current operator of the airport, has agreed to work with Oaktree to ensure a smooth transition.
William Mooney, Jr., president and CEO of the Westchester County Association, praised the deal as beneficial to the entire county. “This is fabulous for the county, fabulous for taxpayers and the entire community, particularly non-profits. It sets an example for the rest of government to think creatively to better utilize our assets and resources.”
The net payments and savings to the county will total more than $140 million.
The county will receive an upfront payment of $130 million from Oaktree, which after revenue share and expenses will provide the county with net proceeds of $111 million over the course of the lease. The proceeds have been structured like an annuity to create a steady, long-term revenue stream that the county can draw on to offset expenses and help to keep taxes stable over the next four decades.
First year net revenue to the county will be $15 million; followed by a net revenue of $5 million in each of the next four years; followed by average net revenue of more than $2 million for the remaining years on the lease.
Oaktree’s payments can be applied to the county’s operating budget as early as 2017.
Specifically, as part of the agreement, a new on-site wastewater treatment facility will capture and treat de-icing fluid. In addition Oaktree will also bring in wildlife management and protection programs to our airport, which it has previously pioneered at its other airport projects. In Puerto Rico, it started a pioneering recycling program and was praised by the FAA for its effective management of trees and green spaces.
The partnership with Oaktree also relieves the county of the financial responsibility for capital improvements and ongoing maintenance at the airport. For its part, Oaktree will now pick up those expenses and has committed to expending at least $30 million in Oaktree-funded capital improvements in the first five years, in addition to other federal funding available to the airport. Oaktree will also make significant additional investments over the course of the lease. The $30 million in Oaktree capital spending will produce an estimated 300 construction jobs.
Oaktree’s investments in technology, infrastructure and amenities will go toward:
• Redesigning the passenger lounge with enhanced seating,
• Reconfiguring the ticketing area to simplify boarding,
• Improving parking with valet and garage check-in options,
• Enhancing the arrival area with new baggage claim equipment, and
• Upgrading concessions and restaurants with more food and dining offerings.
Airport improvements resulting from the deal will also include enhanced airline operations, efficiencies and environmental protections. JetBlue Airways, American Airlines and United Airlines all advocated for and support the improvements, which will help them enhance the passenger experience, improve airline operations and better maintain airport infrastructure. As part of the agreement, each has agreed in principal to a long-term use agreement to serve the airport. The deal provides the airlines with long-term price certainty, greater operational efficiencies and guaranteed capital improvements.
“JetBlue looks forward to a reinvigorated and modern Westchester County Airport to provide our HPN customers the same award winning customer experience at the airport that they enjoy onboard,” said Jeffrey Goodell, vice president Government and Airport Affairs, JetBlue. “JetBlue customers will be able to move seamlessly through the airport and enjoy enhanced food and beverage offerings to significantly improve their airport experience. We commend County Executive Astorino for pursuing a solution that modernizes HPN to the benefit of all airport stakeholders.”
All county rules and regulations with respect to the property will apply to Oaktree. The lease with the county is being managed through Oaktree’s Infrastructure Investing group.
“Westchester Airport is already one of the county’s greatest competitive advantages,” said Marsha Gordon, president and CEO of the Westchester Business Council. “What is so impressive about this public-private partnership is how balanced it is. The plan is pro-business, pro-environment, pro-neighborhood and pro-taxpayer and that’s all good for Westchester.”
CIBC Capital Markets acted as financial advisor to Westchester County on this transaction.
Oaktree worked in close partnership with various levels of government to create the first P3 for a major airport in the United States with the San Juan, Puerto Rico airport. It also jointly created a 50-year P3 with the Maryland Port Administration for the Seagirt Marine Terminal in Baltimore, which is the primary port serving Washington, D.C. Oaktree also intends to have Connor Capital SB, a transportation investment firm, as a strategic minority investor that will assist with management oversight, operational transition and stakeholder management.
This year marks the 20th anniversary of legislation enacted during the Clinton Administration that created the FAA’s Airport Privatization Pilot Program, which is designed to allow access to sources of private capital for airport improvement and development projects. Other P3 projects include the San Juan, Puerto Rico airport, as well as airport projects in Denver, Colorado and Austin, Texas.
infraccess - smart data for infrastructure