The opening date for the new Kansas City Airport Terminal is February 28, and the public will have a chance to see the city’s most expensive infrastructure project in an open house on February 18.
Serious conversation about a new terminal began just under a decade ago, and the road to the terminal’s opening has been turbulent. Even now, controversy swirls around the process by which the developer was selected.
But after the city selected Edgemoor Infrastructure and Real Estate to design and finance the terminal, Kansas City voters overwhelmingly approved the project. Nearly six years and $1.5 billion later, the new terminal is expected to open in just over a month.
It promises accessibility improvements, locally owned concessions, and lots of public art.
But the new terminal is a huge and expensive undertaking. And according to the measure that voters approved in 2017, it explicitly cannot receive municipal funding in addition to airport revenue. So where does the $1.5 billion to pay for the terminal come from? And why is it $500 million more expensive than originally anticipated?
Here is a breakdown of the finances of the terminal.
Expected budget compared to the final price
The cost estimate for the terminal has varied widely since the project was approved in 2017. Initially, the estimate was around $964 million, and it fluctuated from $1.3 billion to $1.6 billion before settling on the current budget of $1.5 billion.
Why the changes? In short, the terminal has gotten bigger.
Pat Klein, director of the Kansas City Aviation Department, said during the airport’s initial evaluation in 2016, called “Exhibit K,” the city recommended a $964 million airport terminal building that would contain 35 gates.
Once voters approved the project in November 2017, the city resumed negotiations with the airlines to finalize the project budget.
“In 2017, we started doing some of the design stuff and the airlines said, ‘Here’s what we’re going to fly to Kansas City,'” Klein said. “And when we looked at the numbers, they actually wanted to build a 39-gate structure.”
That increased the budget to $1.68 billion, he said, which the city and airlines have negotiated up to a $1.5 billion budget cap.
The increased size of the terminal will also allow for expansion of the facility in the future. There is enough space for an additional three gates, two baggage reclaim facilities and two security lanes should increased airport traffic necessitate a further upgrade.
KCI will finish paying for the airport in 2058
So far, 90 percent of the airport has been paid for: The Department of Aviation has already paid $1.35 billion, with $148 million left in the budget.
The money came from bonds: The department borrowed $1.5 billion in 2019 and 2020, at a mixed interest rate of 3.88%. That means the department will make payments of $95 million annually for 35 years.
“That annual debt payment is paid through a combination of airport revenue,” Klein said. “So the airline rents, the parking revenue, the concessions, that all adds up to $75 million. For every passenger that passes through the airport, we get $4.50. That works out to about $20 million a year. So that’s how we pay off the debt.”
The COVID-19 pandemic has taught the airline industry a hard lesson in 2020: that airport traffic is no guarantee, making airport revenues potentially volatile.
With that in mind, the Department of Aviation has struck a deal with the airlines to make sure the city’s rainy day fund is not affected: if the airport’s revenue isn’t enough to pay its annual debt repayment of $95 million, airlines serving KCI are obligated to step in and help pay.
“If there was another March of 2020, where revenue would dry up for four or five months, the airlines would be ready to cover, to make sure we paid off that $95 million debt that year,” Klein said. “They took it upon themselves to be the prop to make sure we’re okay.”
All airlines that serve KCI sign this agreement, which means that as long as flights arrive at Kansas City Airport, the city will pay its debts.
The cheapest upgrades and the most expensive costs
Of the $1.5 billion budget, one of the biggest expenses was the new baggage claim system, which includes miles of baggage carriers. This cost somewhere around $50 million.
Concrete was also expensive, with an estimated $70 million in expenses.
Klein is particularly excited about the new glass boarding bridges, which will replace the beige tunnels that are often used at American airports. He said it was an inexpensive upgrade over the steel option, totaling about $34 million for 39 bridges, plus one more.
“If you’ve been to Europe and traveled, they have glass boarding bridges all over Europe,” he said. “Bring the customer experience right into the cabin. It’s a much better experience if you have 50 people waiting to board that plane and you’re standing on that glass boarding bridge, you can see what’s going on outside.
Klein said that with 39 bridges, the new KCI terminal will be the largest airport in the United States using glass boarding bridges.
This story was originally published in the Kansas City Beacon, a member of the KC Media Collective.