Wednesday, December 17, 2003

Privatize ATL to pay for sewers

By BENITA M. DODD
Georgia Public Policy Foundation

There’s a belief that the only reason proponents of airport privatization want the city of Atlanta to hand over airport operations to the private sector is so that it would operate more efficiently, therefore cost-efficiently. The airport is already operating efficiently, some say, and that negates the need for privatization.

The bottom line is this: The city of Atlanta says it needs $3.2 billion to upgrade its sewer system or it faces court-ordered economic decline brought on by sewer moratoriums. Its options are to obtain the money from rate-payers, continuing to ratchet up sewer rates to the extent that industry and wealthier residents relocate while the 25 percent of households that are low-income must be subsidized.

Atlanta can continue the pipe dream (pardon the pun) of taxpayer funding, from the feds, the state or from a Fulton County sales tax increase that will drive consumers to other counties to shop. Or it can examine city holdings to find an existing source of funds.

Atlanta doesn’t have to look far. Hartsfield-Jackson International Airport is that source. Ron Utt, the Heritage Foundation expert on transportation and privatization, estimated the airport’s value using the “per-enplaned passenger basis,” an industry rule of thumb that values an airport based on the number of passengers served each year.

“Consider Atlanta’s Hartsfield and Chicago’s O’Hare, the nation’s busiest airports,” Utt said. “Each serves more than 30 million passengers a year and each may be worth as much as $5.5 billion.”

Utt made that statement in 1999. Last year, Atlanta’s airport served 76,876,128 passengers. Factor in inflation, and Atlanta’s rate-payers have the means to a top-notch sewer system.

Echoing the argument that it can’t happen because federal airport privatization regulations give the airlines the final say-so and the airlines won’t allow it is naïve. If a feasibility study shows privatization is a viable option, public opinion may well make it politically difficult for airlines to stand in the way.

Even more naïve is the recitation that the airport is as efficiently operated as it can be, so why the need to privatize? And dismissing the possibility simply because the privatization process of part or all of Hartsfield-Jackson could take a while and the city needs the money immediately is, well, wasting time.

It’s commendable that Atlanta’s airport, the world’s busiest in passenger traffic, has landing fees among the lowest in the nation. But undercutting the competition does not necessarily translate to cost effectiveness or efficiency. Lower user fees don’t always reflect the true cost of the service to the users, in this case, the airlines.

No wonder they’re resisting privatization: Atlanta hasn’t raised its landing fees since 1961. As airport manager Ben DeCosta told the Atlanta Business Chronicle recently, “We believe the fee is inadequate.”

Contrast that with DeCosta’s comments last year to the Atlanta Journal-Constitution: “An airline would have to be crazy to agree to the privatization of Hartsfield,” DeCosta said, “Because a private company would have only one incentive, and that is to raise their rents and rates.”

Meanwhile, the world’s busiest passenger airport ranks only 22nd globally in cargo volume, beaten even by its closest passenger competitor, Chicago’s O’Hare (15th). Could that be remedied? Not if everyone supports DeCosta’s dismissive comment to the Atlanta Journal-Constitution: “We’re not looking to make a profit. We’re making sure that the public is safe and secure.”

Those goals are not mutually exclusive. The British government, pioneers of airport privatization, consults with the air transport industry on security requirements for airports and operators. Industry funds the costs of the strict safety and security measures and decides which of the costs to pass on to airport users.

A profit motive is not evil or distasteful, and deregulation need not bring higher costs, as deregulating the airlines and telecommunications proved. Nor does privatization require raising rents and rates. In fact, privatization can encourage the kind of out-of-the-box thinking that led to Conde Nast Traveler magazine ranking Pittsburgh International Airport’s fifth best in the world in 2003; the airport’s profitable Airmall is privately operated with store prices guaranteed to match outside retail outlets.

Smugly dismissing a revenue opportunity while leaders are racking their brains for options to pay for the city’s court-mandated sewer system overhaul means taxpayer and rate-payer wallets are needlessly vulnerable. The city, taxpayers and the sewer system can benefit from the revenue of airport privatization. As long as there are guarantees that a private operator, whether in a long-term lease or sale of all or part of the airport, will charge fair and reasonable rates, airlines and passengers ought to be satisfied, too.

The road to privatization of Atlanta’s airport may be long, but the city’s leaders have an obligation to demonstrate the political will to take the first step: Explore that road.

[Benita M. Dodd is vice president of the Georgia Public Policy Foundation, an independent think tank that proposes practical, market-oriented approaches to public policy to improve the lives of Georgians. © 2003 Georgia Public Policy Foundation.]