Austin Airport Shows Why You Should Never Do Business With The City Of Austin

Austin airport is experiencing record passenger growth, and the terminal needs to grow along with it. So the city’s solution is to use eminent domain to acquire property they already own, by cancelling a lease that they themselves signed. It’s a strange use of the government takings power, which underscores that the city never keeps its word and anyone investing $12 million dollars in a city project does so at their own risk.

Part of how the Austin airport has handled growth so far is by opening a separate, privately-funded terminal for low cost carriers. They gave a 40 year lease to a company to build it, that company has invested tens of millions of dollars, and Allegiant and Frontier currently operate out of the terminal.

The South Terminal has only been open 5 years and the Austin airport has changed its mind. They want the land back to reconfigure how the airport works as part of a new expansion plan.

  • They offered less than $2 million to buy out the lease (!)

  • And they’re moving forward with eminent domain to take back the land (that they already own).

The city’s plan is to close the South Terminal in summer 2023 as part of their plan to build a midfield concourse with at least 10 more gates, connected to the Barbara Jordan Terminal via underground tunnel. This requires relocating the terminal’s taxiways, and using space currently occupied by the low cost terminal. They’ll also introduce a $77 million baggage system and new ticket counters. Yet it’s the strangest eminent domain case.

  • Eminent domain is supposed to allow government to forcibly take private property, with compensation, for a public use. Here they are trying to take public property that they already own.

  • In effect, the taking the city is pursuing is of the contact that allows the private company to operate on airport (city) land.

  • But it’s not a private contract as such – it is the contract they themselves agreed to. They want to use eminent domain to let them cancel a lease they signed. It basically makes the City of Austin untrustworthy as a counterparty.

Since it’s the contract that the city wants to take through eminent domain, and eminent domain is supposed to require just compensation, the private group which operates the terminal is now suing for the value of the contract. It’s really just a leverage play, but they say the contract contemplates their participating in the future growth and development of the airport and that now looks to be worth hundreds of millions, so…

Airports without a real independent governing body tend to be poorly run. Reporting to the City Council as ultimate decision-maker leads to bad outcomes, not just in Austin but also in places like Miami. Everything at the Austin airport is a political process as a result. For instance,

  • The airport has grown so much they need more fuel storage. It carries less than half the fuel it needs for its size so airlines had to tanker in fuel, bringing it in themselves, since expanding storage meant getting the city council’s ok – the National Environmental Planning Act is enough of a veto over U.S. infrastructure, neighborhood activists going to petty elected officials to slow things down can be even worse. Fortunately that finally seems on a better path.

  • But the city council even killed a Centurion lounge for the airport because of indecision over whether a Priority Pass lounge would be better for minority contracting goals, and the airport got neither one. (There’s still space – I hold out hope!)

Austin is a great, growing city. Rents are up 86% year-over-year. It’s now the 5th most expensive rental market in the country right behind San Francisco and ahead of Chicago, Philadelphia and Miami. There was a reason that everyone moved here and it holds onto the slogan ‘Keep Austin Weird’ but the more it grows the less ‘weird’ it becomes.

Home prices are high because of land use restrictions. It’s not like the island of Manhattan, where there’s only so much land and they’ve already built up (which itself could do better). There’s plenty of land. But rules are tight and permitting costly and time-consuming. There’s been a somewhat-fixed supply of housing as people have flocked to the area. That’s driven up housing costs (they’ve gone up everywhere in part due to low interest rates, but they’ve gone up far more in Austin). Grimes knows.

The Austin police department has quiet quit over contract disputes with the city, too. They no longer respond to many calls, even where crimes are in progress. I used to think Austin city government was just regular old incompetent and sort of corrupt. But it turns out it’s even worse than that. They say an honest politician is one who stays bought. But here in Austin they renege not just on their word, but on their signed contracts.

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