KANSAS CITY, Mo. -- Edgemoor, the developer for the new Kansas City single terminal airport, explained the price to build it nearly doubled at City Hall on Thursday afternoon.
Its presentation answered a lot of questions and cleared up misconceptions born from the panic of hearing that the new airport will now cost about a billion dollars more than first projected.
Kansas City Aviation Department Director Patrick Kline and Edgemoor Managing Director Geoffrey Stricker faced a concerned City Council and meticulously presented their justification as to why the price tag for a new KCI has skyrocketed.
"It is not a billion dollars more as we described to council. The comparison between the $964 (million) and $1.9 (billion) is apples to oranges because one is financing cost and one does not," Stricker said.
In 2015, the estimate for KCI was $964 million. After three years of researching the design, the terminal is 300,000-square-feet bigger, gates have been added and concrete paving has expanded. Those changes have increased the cost.
"We have reached a maximum guaranteed price. So as described in the meeting, if comes in at $1.5 or $1.6 (billion) then we take a loss. So we have guaranteed it to be 1.45 number, and we stand by that number, and we are motivated to hit that number," Stricker said.
The $1.45 billion will be paid by bonds guaranteed by the airlines. An additional $175 million will come from KCAD and the airlines. The interest on that debt is around $300 million, which pushes the project total to the scary $1.9 billion mark.
The big question is will that money be passed on to customers at KCI.
Stricker points to the new airport built in San Jose in 2010 as an example. He showed a graph showing that $1.3 billion project had no impact on ticket prices. In fact, they are less than KCI is now.
"And in fact, flyers today who are flying Kansas City are paying for other markets because airlines amortize their costs across the entirety of the country," Stricker said.
Councilwoman Heather Hall was initially against the airport project because of budget and timeline issues.
"The thing that gives me a little bit of a relief is that this is the guaranteed maximum price, so I feel confident if that is the number and we sign off on it then that is the number," Hall said.
According to this plan, the airport will be completed in January 2023.
If not, Edgemoor will be penalized $35,000 per day. It's possible that the project could cost less in the end. If it costs more, Edgemoor will have to pay for overages.
After the company’s explanation of the skyrocketing price tag, Edgemoor presented an ordinance City Council must pass to move the project forward. Part of that ordinance requires the airlines to agree to the project and as of now, they have not signed off on it.
“I have had conversations with American Airlines this morning about this. We have had conversations for the last five years about the project and they have been active throughout the whole thing, they have been great partners,” Kline said.
Kline said the airlines are on board and he expects the airlines to sign a binding agreement around Nov. 15. That is the day City Council will hold a public hearing on the airport construction ordinance. The City Council will make its final decision in December.