Com­mit­tee votes in fa­vor of deal, 4-1, but $1.8 bil­lion con­tract still has tests

The Denver Post - - FRONT PAGE - By Jon Mur­ray

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.”

Cour­tesy of Den­ver In­ter­na­tional Air­port

A ren­der­ing shows a pro­posed ren­o­va­tion of the Great Hall at Den­ver In­ter­na­tional Air­port. Some air­lines are con­cerned about se­cu­rity check­point changes.

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