On the Subject of Privatization …

Concept probably won’t fly at Long Beach, says Chris Kunze, but it has potential

LONG BEACH — The City of Long Beach, CA, like many across the nation, faces a budget shortfall, and is entertaining proposals to privatize various public utilities, including the Long Beach Airport under the FAA’s Airport Privatization Pilot Program. The discussion is in its early stages here, but acting airport director Chris Kunze says his airport has looked into the topic before and he sees little long-term revenue growth potential for a private operator. Yet, he says, privatization of airports may make sense for like communities that don’t have the restrictions that such a move at the airport here would face.

While the airport is city-owned, it operates under an Enterprise Fund, making it self-sufficient. Its airline operations are restricted by an agreement forged in the 1990s, but Long Beach Airport remains one of the busiest general and business aviation facilities in the U.S. and hosts Boeing and Gulfstream as major tenants.

AIRPORT BUSINESS recently discussed the privatization proposal with Kunze, it’s applicability, and the merits of such a move by others. Following is an edited transcript ...

AIRPORT BUSINESS: What is the status of the privatization proposal?

Kunze: The city’s general fund is looking at a pretty significant shortfall, around $15 million. The city manager is thinking outside the box regarding ways to address this.
We were not at all involved in any discussions about airport privatization. A few weeks ago, we were asked to attend a city council closed session to talk about a real estate transaction and the address was 4100 Donald Douglas Drive, which is the airport. It listed some seven or eight Wall Street finance firms.

The city was approached by a number of firms about the potential for privatizing city infrastructure, not just the airport. Some of the things they’re looking at, across the country, are toll roads; marinas; golf courses. We have our own gas department, water department.

It was the city manager’s desire to get some policy direction before anything else was done on it. We gave him the airport department’s position that privatization would basically be a non-starter here at Long Beach.

The closed session didn’t happen; members of the public saw the agenda and noticed it was airport and real estate negotiations and made a case to the city council [to rethink the closed session]. We’ve got a very sensitive community; we’re surrounded by homes and nice neighborhoods.

AB: And what makes you say that it is a non-starter here?

Kunze: We had looked at privatization over the years to see if it made any sense here. I always thought that it did at some airports, but not here.

Our sense is it’s not going to go anywhere here. At some airports that have our infrastructure and our marketplace, it could be a good option. The reason it would not work here at Long Beach, in my opinion, is because we have a very, very unique noise ordinance. It’s the result of 13 years of litigation; 14 airlines suing us. All the user groups were suing us, as well as 1,600 homeowners. There was finally a settlement in 1995.

We adopted a noise ordinance, and FAA grandfathered it under ANCA, the Airport Noise and Capacity Act, because we were in litigation when it was adopted. It allows 41 daily airline flights and 25 daily commuter flights. We have a very complex noise ordinance where we monitor every flight in and out; the noise level of that flight; and then we allocate that noise to a specific user budget.

There are five different budgets: airlines, commuters, general aviation, charter, and industrial operations. Every single event noise level that gets recorded in one of our 18 monitors ends up being put into one of these budgets. For the airlines and commuters, we have a community noise equivalent level budget, which is noise averaged over a 24-hour period. The baseline period is 1989. If they end up flying inside of their baseline noise budget, they can earn more flights.

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