Puerto Rico gov’t would ground airport P3 if FAA rejects

Written by  //  October 10, 2012  //  Government  //  No comments

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Gov. Fortuño (center) and David Álvarez address the media following the “First Forum on Infrastructure: Focus on Puerto Rico” conference, sponsored by Abertis. Abertis CEO Francisco Reynés (left) looks on. (Credit: La Fortaleza)

Puerto Rico Public Private Alliance Authority Executive Director David Álvarez acknowledged Tuesday that if the Federal Aviation Administration fails to give its go-ahead to the Luis Muñoz Marín International Airport P3, the government would cancel the deal.

During the “First Forum on Infrastructure: Focus on Puerto Rico” conference, Álvarez said if that were the case, the government would continue to manage Puerto Rico’s main airport facility, but with limited resources.

“We’ve thought about all the scenarios and have made much progress in case the FAA’s review is negative, we have some preliminary plans to continue to manage the development of the airport with the resources that the government has,” Álvarez said.

However, he and other government officials have repeatedly said the Puerto Rico Ports Authority does not have the necessary funds to bring the airport to the world-class level it should be. The fact remains, however, that elections are less than a month away and open up the possibility for a new administration to come in and turn all plans on their head.

Last month, the FAA began analyzing the proposed P3 through which the government of Puerto Rico would turn over the management of the airport to private hands, in this case, to Aerostar Holdings, a consortium made up by Mexico’s Grupo Aeroportuario del Sureste (ASUR) and Highstar Capital under a 40-year agreement.

The private group will be required to pay the government $615 million upfront and make annual payments over the life of the contract.

On Sept. 28, the FAA held a public hearing in San Juan to glean the opinion from stakeholders, including airport employees, concessionaires and contractors who would be affected by the deal. Government officials also had their say that day. The agency will continue accepting online comments through Nov. 19.

Reuters blogger weighs in
The airport P3 came under harsh criticism by Cate Long, a blogger for Reuters, who called the transaction a “giveaway” of a major public asset. In her entry, Long noted that Puerto Rico will receive “no benefit from the upfront payment other than retirement of debt,” referring to the Ports Authority’s massive financial load.

“The key to understanding the deal is knowing how much ASUR will earn. The company will receive $62 million per year from airlines that use the airport’s gates and facilities. ASUR will also earn approximately $36 million per year from “Passenger Facility Charges,” Long said. “The FAA allows the airport operator to collect a $4.50 fee per ticket from passengers to use for capital improvements to the facility. ASUR will also receive revenues from commercial concessionaires.

“It’s likely that ASUR will fund the capital improvements of the airport with these fees along with grants from the FAA. However, the rational is not clear to me why the U.S. federal government will give multi-million dollar grants to private firms that are taking control of public assets,” she added.

If the FAA were to turn down the application — which the Puerto Rico government submitted under the agency’s Airport Privatization Pilot Program — the Ports Authority would have to come up with $245 million to finance the construction projects the airport needs in the next three years.

During the forum, Gov. Luis Fortuño touted the administration’s P3 strategy, saying it has become a “model to follow.”

“It’s a great achievement that we’re considered a role model, not only in the rest of the United States but in other countries,” Fortuño said. “P3’s are a tool to do more with less, and through which we establish strong partnerships between the private and public sectors to create economic opportunity and together build a future of progress for Puerto Ricans.”

Fortuño said the P3’s the government has promoted since 2009 — for schools, bridges, roads and renewable energy projects — have resulted in more than $11.5 billion in investments.

However, he refrained from reacting to the Reuters writer, who has criticized the Puerto Rico government’s dealings in the past.

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