Md. board assails deal with airlines

Officials angry BWI managers left $32 million uncollected

May 22, 2008|By Laura McCandlish | Laura McCandlish,Sun reporter

The Board of Public Works berated airport management yesterday as the panel reluctantly approved a settlement reached with airlines that forgoes $32.2 million in undercharges for terminal rents, construction costs and fees at Baltimore-Washington International Thurgood Marshall Airport.

The state board said the Maryland Aviation Administration's errors, representing five years of uncollected charges, raises larger questions about the airport's oversight of its multimillion-dollar contracts, such as the one with concessions manager BAA Maryland Inc. now also under scrutiny.

"How can we just leave $32 million on the table?" Maryland Comptroller Peter Franchot, leading the criticism, demanded of Transportation Secretary John D. Porcari. "Why weren't we more aggressive in making the whole payment stand? ... What fail-safes have you put in place so that this doesn't happen again?"

Franchot also told Porcari to report back on the aviation administration's contract with BAA, to determine if the terminal operator has made progress toward meeting its previously missed revenue and minority-business subcontractor targets. The previous Board of Public Works granted BAA a five-year contract extension, through 2022, at its final December 2006 meeting.

"Was that a bad deal for the state?" Franchot said. "I know the legislature had concerns that the state was not getting the proper return from them."

The deal that leaves out the $32 million comes as Gov. Martin O'Malley's administration is struggling to plug budget deficits by cutting spending, raising taxes and pushing for approval of slots gambling. In particular, the state's Transportation Trust Fund, which pays for airport construction projects, faces a $40 billion backlog in infrastructure improvements.

O'Malley, who sits on the Board of Public Works with Franchot and Treasurer Nancy K. Kopp, raised few questions, only noting that the errors in calculating charges were made under the previous administration, headed by Robert L. Ehrlich Jr.

The additional costs also couldn't come at a worse time for airlines, which are being drained by record fuel prices.

Under the terms of the settlement agreement ratified by the board yesterday, the MAA will collect $25.04 million of the $57.3 million in airline undercharges over the next five years. Southwest Airlines, BWI's largest carrier, has agreed to pay $12.2 million of that sum in exchange for reduced rents and landing fees moving forward. No. 2 AirTran Airways will pay about $2 million.

The MAA agreed to not collect the $32 million to avoid litigation by the airlines because it represents charges for 2004 through 2006 that went undetected too long, Porcari said. The $25.04 million stems from undercharges in fiscal 2007 and 2008.

Collecting the full amount could also have induced carriers to reduce the number of flights and gates they operate at BWI, Porcari said. Remaining affordable for discount carrier Southwest is a priority, he said, as the airline expands into nearby airports in Philadelphia and Washington.

"We wanted to reach an agreement to recover it in a way that was not too burdensome to the airlines," said Timothy L. Campbell, the MAA's executive director.

A main cause for the undercharges was an overestimation of the square footage of the Southwest terminal that opened in May 2005.

Overall, the MAA overstated the amount of terminal space leased to airlines by 12 percent, according to an Attorney General's Office memo obtained by The Sun.

Demolished terminal space in Concourse B was not deleted from square footage estimates when the new Southwest Concourse A came online, Campbell said.

"The measurements were taken by our staff; the fact is, there were just mistakes made," Campbell said. "It's pretty embarrassing, and our commitment is that it won't happen again."

In addition, other capital projects funded by the Transportation Trust Fund were underestimated, including the planning and design costs of projects that were later scrapped, according to the memo prepared by Louisa H. Goldstein, the attorney general's counsel to the MAA.

The $57.3 million mistake was first discovered last October as Jacobs Consulting auditors reviewed BWI's contracts with its airlines. It took aviation officials and the airlines until April to reach an initial settlement agreement, Campbell said.

BWI will work to make up the lost shortfall by cutting its operating costs across the board in the coming years, Campbell said. Some 10 vacant MAA staff positions will go unfilled, and utility costs will be reduced through conservation measures, he said.

On the questions related to BWI's contract with its concessions manager, Campbell said BAA executives will give a briefing at the July 9 Maryland Aviation Commission meeting.

BAA does not meet all of its minority subcontracting goals. It falls short on goals for minority-owned retail stores but exceeds goals for food and beverage outlets, Campbell said.

BAA is facing lawsuits from two former tenants, a woman and a minority member who said they were unfairly forced out of business in favor of big national retailers.

One of the two is Melissa Fulton, the former owner of Celebrate Maryland, a locally owned group of souvenir shops that has gone out of business at BWI.

"It seems unfair and perhaps even discriminatory to be so generous with large, multibillion-dollar public corporations," Fulton testified before the board and Porcari yesterday. "The state's arrogance is quite evident when small, minority-owned business in the same circumstances are given no help, no concessions, no reduced rent or fees but are, in fact, forced out of the airport."

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