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KC Aviation Dept: Airlines have 'no anxiety at all' about increased KCI price tag

Posted at 4:54 PM, Nov 01, 2018
and last updated 2018-11-01 22:51:52-04

KANSAS CITY, Mo. — The director of the Kansas City Aviation Department, who has been meeting with airline executives across the country, said they have “no anxiety at all” about the $1.9 billion price tag on the new terminal.

Director of Aviation Patrick Klein already met with Southwest, American and Spirit, but he still needs to sit down with Delta, United and Alaskan.

The airlines are covering the cost of the new terminal, which was overwhelmingly approved by voters almost a year ago. 

Members of the KCI-Edgemoor project team appeared before KCMO City Council Thursday to update members on the cost and timeline for the terminal. 

“I guess my question is, are they in agreement with this number, 1.923?” Councilwoman Teresa Loar asked about the airlines.

While Klein affirms they are, the airlines have not yet signed the agreement. There is one change to it since the city started this process. If the airport doesn’t make enough revenue to cover payments, the airlines are on the hook instead of the aviation department.

"In the new term sheet, the airlines will be responsible for those overages, so they want to make sure that term sheet is as defined as possible and all their corporate folks are as comfortable with it as can be," Klein said.

Representatives from the airlines will attend a Nov. 15 airport committee meeting, during which council members will discuss an ordinance that includes the development agreement, community benefits agreement and the use & lease terms sheet. 

"If I was an airline, I would be very dismayed at the increase in cost," said Patrick Tuohey of the Show-Me Institute.

Tuohey has long been a critic of the new KCI project. He feels the city should have been more up front about the cost of financing the terminal.

"Frankly the fact that the price is twice as much and the opening date has been pushed back more than a year makes me think I'm not confident in anything the city tells me about this project," he added.

Total Cost and the Development Agreement

There are several factors that go into the estimated $1.9 billion price tag for the terminal:

  • Edgemoor: $1.459 billion
  • KCAD Project Costs, Airline Costs: $175 million
  • Financing Costs: $401 million

The Edgemoor, KCAD and airline project costs last went up in June, when additional gates were added to the terminal. 

"I expect you'll be getting more design work done over the next four or six months, so will we be looking at more increases?" Councilman Quinton Lucas asked the KCI-Edgemoor team.

The answer to that question is no, at least on the Edgemoor side of things. The development agreement lays out a guaranteed maximum price or GMP. That number is set at $1.459 billion, meaning Edgemoor will be liable if project costs rise above that.

Edgemoor will also be penalized $35,000 per day if the terminal misses its January 2023 opening date.

The aspect of the total cost that could change, for better or worse, is the $401 million for financing.

"If the interest rates happen to drop instead of go up, then that number could become lower," Klein said. "If the interest rates go up, they could definitely be higher on the financing cost."