Ontario Yields To Keeping LA Employees In Signing On To Airport Pact

The settlement agreement between the City of Los Angeles and the Ontario-dominated Ontario International Airport Authority effectuating the return of Ontario Airport to local control provides assurances that the 214 employees now employed at the facility by the Los Angeles-owned corporate entity that runs the airport will retain their jobs at least until March 2017.
Though the tentative agreement was announced on August 6 and the finalized terms of that pact were put into final draft form last month and executed by the Ontario City Council, Ontario International Airport Authority and Los Angeles World Airports’ board of airport commissioners on December 22, the agreement itself was not publicly released until this week.
The basic financial terms of the agreement have been known since the tentative agreement was announced with much fanfare last summer. What was laid out in the final agreement is somewhat different.
In August Los Angeles Mayor Eric Garcetti coyly gave two figures with regard to the actual amount of money Ontario would fork over to finalize the transfer, saying that Ontario newspapers could call it a $150 million deal and that Los Angeles newspapers could refer to it as a $260 million transaction. Ontario, he said, would put up $150 million for the airport. In addition, Ontario would provide $60 million to purchase assets technically belonging to Los Angeles World Airports that are in place at Ontario Airport and which are crucial or indispensable to its operations. In addition there was an understanding that bonded indebtedness of roughly $50 million related to the airport would become Ontario’s responsibility to service.
According to the finalized agreement put into effect on December 22, Ontario will pay $30 million from its reserves at the time of the transfer — two $15 million installments during the escrow process — and make additional payments of $50 million over five years plus another $70 million in the final five years, according to the agreement.
Los Angeles World Airports, the municipal corporate entity which runs Los Angeles International Airport, Ontario Airport and Van Nuys Airport, is to transfer $40 million from Ontario airport’s unrestricted cash accounts to Los Angeles International Airport. Ontario is to assume responsibility for servicing any outstanding bonded indebtedness pertaining to the aerodrome.
The settlement agreement rescinds the 1967 agreement that gave control of the airport to Los Angeles, and the 1985 agreement transferring ownership to Los Angeles.
Los Angeles made substantial investment in Ontario Airport following the 1967 formation of the joint powers authority between the two cities. At that time, fewer than 200,000 passengers passed through Ontario Airport’s gates. Los Angeles, with its control over gate positions at Los Angeles International Airport, used that leverage to induce more airlines to land at and depart from Ontario. In relatively short order ridership at Ontario Airport increased dramatically.
All told, Los Angeles instituted some $550 million worth of improvements to the airport, including paving its gravel parking lot, laying down a second and entirely new east-to-west runway over its obsolete northeast-to-southwest landing strip, and modernizing its existing east-to-west runway, including the widening of taxiways and the addition of storm drains. Ontario Airport’s landing and take-off paths were converted into the longest such civilian facility in Southern California, and Los Angeles erected a state-of-the-art control tower, and constructed two ultra-modern terminals at a cost of $270 million, augmented with a world class concourse. In 2007, 7.2 million passengers came through Ontario Airport, a 3600 percent increase over what Ontario had been able to achieve on its own 40 years before.
Four years ago, Ontario city officials, led by Councilman Alan Wapner, were suggesting that Los Angeles should simply deed the airport back to Ontario as a public benefit transfer, propounding that the airport had no value as marketable real estate. Quietly, however, the city of Ontario made a confidential offer to purchase the airport for $50 million and an assumption of $71 million in bond debt related to financing for improvements that had been made to the airport and repay Los Angeles another $125 million for passenger facilities charges collected at Los Angeles International Airport that were used to make improvements at Ontario Airport. That effort failed and Ontario initiated an increasingly acrimonious campaign to wrest ownership back from Los Angeles. That campaign included the filing of a lawsuit against Los Angeles in 2013, the stated goal of which was the return of the airport. Just prior to that suit going to trial in August, the agreement for the airport’s return to local control was struck. The entity representing “local control” is the Ontario International Airport Authority,” an entity created by Ontario three-and-a-half years ago which had as four of its five board members current or past Ontario city officials.
Ontario officials are now obliged to make good on their claims that they can do a better job of running the airport than Los Angeles. A major issue in that regard will be operational costs. In the lead up to the lawsuit and during the lawsuit, while Ontario was contending that Los Angeles World Airports was mismanaging the airport, there were suggestions that the high cost of operating the airport was driving up the costs passed along to airlines flying into and out of Ontario. Those costs were discouraging the airlines from scheduling more flights into and out of Ontario, Ontario officials contended. Ontario officials maintained their takeover of the airport would entail greater efficiency than has been in place while Los Angeles is calling the shots.
But as part of the transfer agreement, Ontario has agreed to retain all of the current Los Angeles World Airports employees in place at Ontario Airport for at least 21 months. Ontario officials had long complained that Los Angeles World Airports was employing far more people than were necessary, and that Ontario Airport was serving as a dumping ground for Los Angeles city employees who had outgrown their usefulness elsewhere. Ontario maintained that if it had control of the airport, it would transform it into one that would serve as a magnet for more than the eight airlines operating there now by streamlining its operations through dispensing with unneeded employees and thereby achieving operational cost savings that would be passed along to the airlines. Ontario, which is now wedded to keeping the current workforce at the airport in place for 21 months from the time the transfer agreement went into effect, will not be able to achieve those savings at least until March 2017.
The agreement is retroactively effective to July 30, 2015. The agreement sets a “transition period” the exact duration of which is unspecified, but which initiated as of the July 30 date. A major issue in the transfer is the Federal Aviation Administration’s pending approval. In the meantime, Los Angeles World Airports will continue to operate the airport. That issue is tricky, because in order to approve the transfer, the Federal Aviation Administration must be convinced that Ontario has the wherewithal to run the airport on its own. Once the Federal Aviation Administration makes that finding, according to the agreement, “Los Angeles shall transfer, assign and deliver to the Ontario International Airport Authority, on an ‘as-is’ condition at the time of the transfer, its right, title and interest in and to all of the assets, properties, rights and interests” pertaining and belonging to the airport.

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