Committee votes in favor of deal, 4-1, but $1.8 billion contract still has tests
A $1.8 billion partnership contract that covers the renovation of Denver International Airport’s terminal and three decades of oversight of new concessions passed its first test Wednesday in the City Council.
But a committee’s 4-1 vote to advance the public-private partnership contract with a team led by Madrid-based Ferrovial Airports doesn’t mean it will face smooth sailing on the council floor.
Several council members expressed various reservations about the Great Hall project deal, including some who aren’t voting members of the business committee.
“I have to be comfortable with where we’re at with the finances and the exposure of this asset,” said Councilwoman Debbie Ortega, referring to DIA’s terminal. She chaired Wednesday’s meeting and cast the sole vote against advancing the contract to the floor.
“Looking at the 34-year term is something that concerns me. … I’m hoping I can get there,” she said.
The proposal now heads to Tuesday’s mayor-council meeting, giving council members a chance to discuss the contract with Mayor Michael Hancock. It will be eligible for a final vote on the council floor Aug. 7, but it’s likely some members will seek at least an additional week to consider the contract.
Another specter hung over Wednesday’s council discussion: the public opposition to the project from DIA’s major airlines because of still-unresolved concerns over new security checkpoints and an uptick in the airlines’ operating costs.
United, Southwest and Frontier are among several carriers that object to DIA’s plan to move security screening to the upstairs level because of numerous security vulnerabilities. The
new checkpoints, which would use a new setup and faster screening technology, would share space now occupied by ticket counters.
United Airlines’ Chicago-based president, Scott Kirby, attended the committee meeting to reiterate the airlines’ concerns.
“They’ve got a pretty aggressive set of assumptions about how we can process (passengers) faster in the future,” he said about DIA officials after the meeting. “And that we won’t need as much space. Some of those assumptions, like how fast the security lanes will work, are well beyond anything that’s happening in the world today.”
The contract that is before the council is a 157-page main “development agreement” accompanied by nearly 15,000 pages of attachments and project specifications.
While some council members said they felt comfortable with the terms of the contract — after a year of intensifying one-on-one briefings and other meetings — others asked probing questions about several issues.
Among them: the tight timeline before a Sept. 1 deadline set by a negotiations agreement; the financial terms for the airport; rules governing Ferrovial’s oversight of most new terminal concessions; what risks Ferrovial might be taking; and the fate of workers in existing terminal shops and restaurants that would have to close during construction. (Councilman Paul López and the Unite Here union wants more assurances their jobs will be safe and protections for union-organizing.) The Ferrovial team’s profit margin also came up. The airport says Ferrovial is guaranteed a minimum 4.8 percent investment return and as much as 10.8 percent, depending on how well the new concessions perform.
All told, Ferrovial’s cash investment, debt and other costs are estimated at $378 million over the life of the contract. Excluding interest on borrowing, DIA would shoulder a commitment as high as $1.8 billion — including covering 74 percent of the $650 million renovation cost, providing a $120 million contingency fund, and then paying annual capital and operational payments to the Ferrovial team that over 30 years will total $1.2 billion.
Under the partnership deal, Ferrovial and Centennialbased Saunders Construction would renovate both the main and upper levels of the 22-year-old terminal over four years, starting next summer.
On the terminal’s main floor, the project calls for building out new money-generating food and retail outlets, which passengers would encounter after passing through security on their way down to the concourse trains. Ferrovial, which has airport operations contracts at London’s Heathrow and elsewhere, would oversee the leasing of about 35,000 square feet of terminal concessions spaces for 30 years, pocketing a 20 percent cut of that revenue and giving the rest to DIA.
Ferrovial’s equity partner is JLC Infrastructure, an investment fund started by former NBA star Earvin “Magic” Johnson and Loop Capital.
Committee members Chris Herndon, Mary Beth Susman and Kendra Black, along with president Albus Brooks, voted to advance the deal.
“I am ready to move this forward,” Herndon said. Added Susman: “I’m really proud of our council and how much it’s obvious (from Wednesday’s questions) that we have studied this so carefully.”
A rendering shows a proposed renovation of the Great Hall at Denver International Airport. Some airlines are concerned about security checkpoint changes.