LaGuardia project to reach commercial close in April

The Port Authority board authorized $2.9bn for the LaGuardia redevelopment project, during a meeting that was both lengthy and episodic.

Port Authority of New York and New Jersey commissioners were locked in a heated exchange Thursday as they debated whether or not to allow the LaGuardia Redevelopment project to proceed at the agency’s board meeting in New York City.

The protracted and intense debate initially made approval of the project seem anything but certain. The strongest opposition came from Port Authority Commissioner Ken Lipper, who was appointed to the board by New York Governor Andrew Cuomo in 2013.

“As I see many of my friends out here from the last three years I’ve been on the board, you know how hard I’ve fought for LaGuardia Airport. I was intimately involved in the final negotiations to make it happen as well as with the [Port Authority] bus terminal,” he said during the Committee on Capital Planning, Execution and Asset Management meeting, which would decide whether the resolution would go before the full board for a vote or be tabled for a later date. “Despite my huge personal investment in these projects, which I believe are very important for the region, I find myself unable to vote for it because I believe that the resolutions we’ve been asked to vote on […] [is effectively] asking the board to illegally delegate authority to people who cannot exercise that authority while protecting the public interest.”

Lipper claimed that the language contained in the resolutions, which would authorize the executive director “to take any and all action and engage in any and all activities to effectuate the transaction among the Port Authority and the preferred proposer,” was a dereliction of duty.

His position provoked a strong response from fellow Commissioner Steve Cohen, also appointed by Governor Cuomo.

“I assume, given your heightened sense of responsibility, that you feel that should apply to not just this project but all projects on which we are being asked to vote,” Cohen remarked, referring also to Newark Liberty’s Terminal A project, for which the board was asked to authorize $2.3 billion.

Cohen also noted that the language used in previous resolutions, which Lipper had agreed to in the past, had not changed. “Your votes in the past with this very language was in the regulation. Was it suddenly that a light bulb went off or that your position has changed?” Cohen asked Lipper.

According to Lipper, the cost of the LaGuardia project, which has risen to $5.3 billion, is what gave him reason for pause.

Money problems

The actual cost of the project also proved to be highly contentious. In his opening remarks and presentation of the LaGuardia project, Port Authority Executive Director Patrick Foye, also a New York appointee, addressed media reports claiming the price tag was now $1 billion higher than initially estimated.

“Last year, the Port Authority said the cost of constructing Terminal B would be around $4 billion,” Foye said. “Today, we have in hand a fixed-price, guaranteed construction agreement of $4 billion for the new Terminal B, including the Central Hall.”

According to recent reports, the project is estimated to cost $5.3 billion, but Foye pointed out that figure includes $605 million spent on LaGuardia’s modernization and other costs since 2004.

“The $605 million is mathematically correct but it’s misleading,” Foye noted. “Just as it would be misleading to include the $1 billion spent at Newark Liberty since 2004.”

John Degnan, who was appointed chairman of the board by New Jersey Governor Chris Christie in 2014, shot down Foye’s remarks. “Thank you Pat for that presentation,” he said, addressing Foye. “However, I want to totally disassociate myself from your introductory remarks. Those articles that reported that the cost of LaGuardia Airport are $5.3 billion are exactly correct.”

Moving forward

After additional debate, the board decided to move forward with voting on the resolution for LaGuardia during the full board session. Once again, Lipper expressed his concerns about the language in the resolution, despite a clause that states that all contracts and agreements are subject to approval by the Port Authority’s General Counsel or his authorized representatives.

Initially voting yes on the resolution, Lipper changed his vote while the board had moved on to a following item, asking that the record show that he abstained from the vote, which did not prevent the resolution from being approved.

The board promised to take his concerns under consideration and to amend the language at a later time.

According to a Port Authority spokesperson, the LaGuardia project is expected to achieve commercial close by mid-April and financial close by the end of May.

Largest P3 in US history

Unlike the replacement of Terminal A at New Jersey’s Newark Liberty Airport, which the Port Authority will fund through traditional financing, the redevelopment of LaGuardia will be delivered through a public-private partnership, the largest for building new infrastructure in the country’s history.

The reason for doing so, Thomas Bosco, the agency’s director of aviation explained, is because the LaGuardia project poses the challenge of demolishing and building a new terminal while the airport continues to operate. Newark Liberty’s Terminal A will be built on a currently undeveloped site.

“Under an innovative public-private partnership […], LGP [LaGuardia Gateway Partners] will design, build, finance, operate and maintain the facility, with responsibility for financing two-thirds of the new terminal,” the Port Authority said in a statement, referring to the private consortium awarded the project last May which comprises Meridiam Infrastructure, Vantage Airport Group and Skanska.

During his presentation of the project, Foye stressed that the debt incurred by LGP for LaGuardia will be fully non-recourse to the Port Authority. “The Port Authority will not guarantee, directly or indirectly, a dollar of LGP’s debt,” he said.

The agency will fund its portion of the cost by contributing passenger facility charges (PFCs), subject to FAA approval, and will fund roadway work and supporting infrastructure.

Built in 1964, Terminal B had a design capacity of 8 million passengers, significantly less than the 13 million passengers that passed through in 2013. The project entails replacing the existing 835,000-square foot terminal with a new 1.3 million-square foot, 35-gate terminal building to increase capacity; building a new Central Entry Hall, a key recommendation of Governor Cuomo’s advisory design panel, which will connect Terminals B and C; and a new 3,000-space parking garage.

“Today the board approved $6-$7 billion for airports,” Foye told reporters after the meeting. “This was an incredible day and what you saw was robust discussion of commissioners from both states in good faith debating these issues,” he said in response to questions about the agency’s alleged dysfunction and public disagreement.

“I agree entirely with what Pat just said,” Degnan interjected. “Openness and transparency which have been urged on this Port Authority for years, and democracy are messy. But if they work properly they get things done.