Here’s What St. Louis Can Learn From Denver’s Failed Airport Privatization Deal | St. Louis Public Radio

Here’s What St. Louis Can Learn From Denver’s Failed Airport Privatization Deal

Sep 27, 2019

DENVER — For Paula Gallegos, who flies out of Denver International Airport weekly on business trips, a 15-minute detour through construction is understandable for a few months. But a few years?

“Two or three years with this is a little much,” she said, pointing to the white paneling guarding exposed concrete and iron beams. “But, I mean, what do you do?”

She’s one of many Denver residents frustrated that a construction project halted last month is blocking a third of the airport’s main terminal. That’s after Denver’s mayor pulled the plug on the nearly $2 billion construction and privatization deal with Great Hall Partners, a group led by Spanish company Ferrovial Airports.

The move by Denver officials is prompting questions in St. Louis, where Ferrovial Airports is also likely to bid on a potential lease for St. Louis Lambert International Airport. Former Mayor Francis Slay — who started the airport privatization process in his final days in office — is also a lobbyist for the company.

For more than a year now, the St. Louis Airport Advisory Working Group has been exploring the idea of leasing Lambert to a private operator. The group is still finalizing a request for qualifications to vet any potential bidders. When asked about Ferrovial’s experience in Denver, members have said they need to wait to see what bids come in before making a judgment.

But officials in Denver say there’s a lot to learn from what happened at their airport.

What happened?

The decision to end the deal with Great Hall Partners wasn’t made lightly. It will cost the city at least $200 million just to end the contract, which included a construction project — to address security and capacity concerns — and a 30-year lease of concessions in the main terminal.

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Airport officials say they won’t know the total cost of ending the deal for several more months.

During a press conference last month, airport CEO Kim Day said the project had gotten out of hand. Just a year into construction, the contractor projected it needed an extra three years and $300 million to finish the job.

“We are very far apart in terms of cost and schedule and our values — prioritizing safety, the passenger’s experiences and our airline operations,” she said.  

Day acknowledged the airport could have done more but maintains it didn’t make a mistake in hiring a private company for the job. 

In a statement, Ferrovial blamed the discovery of weak concrete as the core problem, but promised a smooth withdrawal from the project. Both the company and the airport declined interview requests for this story because the two are in termination negotiations.

While officials in Denver cannot speak directly about Ferrovial during the negotiations, many are reflecting on what went wrong.

Former City Councilman Rafael Espinoza voted no on the nearly $2 billion contract for construction and privatization of Denver International Airport's main terminal.
Credit Corinne Ruff / St. Louis Public Radio

 

‘Two file boxes of documents’

At the airport, the absence of work until further notice is a visual reminder of the mistakes made throughout the process, former Denver City Councilman Rafael Espinoza said.

“I’ll be honest, it’s a long ways, a long ways from finished,” the former architect said. “We’re probably at 25% right now.”

In Denver, the city council is the last body to approve contracts, including the airport deal. And in retrospect, Espinoza said he wishes he would have done more to persuade his colleagues to vote no with him. Of the 13 council members, two voted no, one abstained and 10 voted for the deal.

Espinoza, who has since left city politics, said his main objection was that he felt the deal went through based on relationships instead of merit. 

“If all you’re doing is you’re buying the lobbyist line and what you saw in Heathrow, and the fact that they’re nice guys when you shake their hands — that is not how you build airports,” he said. 

Espinoza added that while several city council members visited Ferrovial’s European airports before they voted on the contract, he did not.

He also warns St. Louis officials to watch out for potential conflicts of interest.

“That’s my caution to you guys in St. Louis: How is that deal being done? Is it being done on the nuts and bolts and facts of how things get built? Or is it getting done by schmoozing and wooing and being seduced by money?”

Councilwoman Debbie Ortega was the other no vote on the contract. 

In hindsight, she said the council should have demanded more transparency and time to get the process right. And that’s a lesson she says St. Louis elected officials should take away.

Councilwoman Debbie Ortega is one of two members of the Denver City Council who voted no on the airport contract.
Credit Corinne Ruff / St. Louis Public Radio

“I would just hope that your Board of Aldermen are taking the time to be thorough in looking at all the details so that they know what the long-term commitment is they're getting the city in the middle of,” she said.

Ortega said she was frustrated that she was only given a week to review the 1,500-page document and that she wasn’t allowed to seek advice from outside counsel.

“Some of us actually got hard copies of the contract and started plowing through it, which were two boxes, two file boxes of documents,” she said. “It didn’t include the financials.”

‘Is it a good fit?’

St. Louis Public Radio reached out to all 13 members of the Denver City Council for this story, but only one of the members who voted for the deal spoke with us. The others said they were unavailable because of ongoing termination negotiations and budget hearings.

Councilman Chris Herndon, who voted yes, acknowledged things could have gone better with the contract, but the fallout hasn’t shaken his support of public-private partnerships. 

“We didn’t even get to the private part of this,” he said. “This was really just a bad contractor.”

And, he said, just because it didn’t work out in Denver doesn’t mean it won’t work in St. Louis.

Councilman Chris Herndon is one of 10 members of the Denver City Council who voted for the airport deal.
Credit Corinne Ruff / St. Louis Public Radio

“You have to ask yourself: ‘Is it a good fit?’ And that’s why it’s important for them to do their due diligence,” Herndon said of the St. Louis Board of Aldermen. “I wouldn’t say you shouldn’t do it because of what happened in Denver. They’re two separate incidents.”

He says it will be up to St. Louis officials to weigh this experience in Denver along with Ferrovial’s work with other European airports, like those in Madrid and Barcelona.

And if St. Louis does move forward with privatization, he advises engaging the public — because at the end of the day, he added, they would be losing a public asset.

“Sometimes we focus on the loss, but you also need to ask yourself: What is that gain through privatization?” he said.

Tish Maes, a Denver resident and airport consultant, overlooks construction in Denver International Airport's main terminal while waiting for a meeting.
Credit Corinne Ruff / St. Louis Public Radio

Taking back control

Despite the dust and disruption at Denver’s airport, Tish Maes doesn’t believe passengers will be turned away. She’s a Denver resident, and she also happens to work as a consultant, advising airports around the country.

Airports make a powerful first impression for passengers visiting a new city, she said, and that’s why she believes cities need to have control over their operations.

“When they get off the plane, they’re in your airport — kind of walking right into your home,” she said. “And so, you want to put out your best china and make it look nice for your guests.”

Maes is skeptical that privatization leaves cities with enough oversight.

“And I would tell that to any city council member that was thinking about doing so,” she said. “Keep it in your own hands, keep it to your own baby, because then you’ll nurture it the way it needs to be.”

That’s what Denver airport officials intend to do from here on out, starting with taking back control of the project. They expect a new contractor to start construction under their supervision by early next year.

While Denver International Airport officials did not agree to an interview, a spokeswoman from the CEO’s office did offer some advice via email. 

In order to keep things transparent, make sure you can audit project and payment records, she said. To stay on schedule, set clear milestones with penalties. 

And — don’t forget the termination clause. 

Correction: A previous version of this story misstated which members of the Denver City Council visited Ferrovial's European airports. Former Councilman Rafael Espinoza did not participate in any of those trips.

Follow Corinne on Twitter: @corinnesusan

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