The St. Louis region is similar to Puerto Rico in more ways than you might think. Debt struggles. Powerful chief executives implicated in corruption scandals forced to suddenly step down. And now, airport privatization.
In 2012, after a one-day hearing, the Federal Aviation Administration fast-tracked the first de facto privatization of a major U.S. airport, Puerto Rico’s Luis Muñoz Marín International Airport outside San Juan. The airport’s privatization took the form of a 40-year lease to consortium Aerostar Airport Holdings with little to no public input.
Now St. Louis is exploring what would be the first major airport privatization in the continental United States. Instead of fast-tracking the process like Puerto Rican leaders did, St. Louis leaders must think deeply about both the implications for the well-being of the city as well as what a fair, open and transparent process might look like.
One major lesson from Puerto Rico to St. Louis is to watch out for consultants and lawyers connected both to the government and to prospective bidders. The web they weave is thick and strong, and needs to be researched in depth. In principle, under FAA regulations, bidders with conflicts of interest were supposed to be disqualified, yet Puerto Rico’s transaction was plagued by questionable practices. Puerto Rico agencies steering the airport privatization contracted with advisers who later became bidders, such as Macquarie Capital USA.
Firms that served as legal advisers that had actual or former clients among the bidders also were allowed into the process. This was the case in Puerto Rico with law firm Mayer Brown, which was counsel to several proponents and is also involved in the proposed St. Louis airport transaction.
We’re seeing a similar drama play out in St. Louis, with St. Louis Lambert International Airport’s potential path to privatization pushed by political insiders with connections to regional government. Lobbyists and limited liability companies seem to form a web between the mayor’s office, former county executive Steve Stenger, and those who stand to profit from privatization of the airport.
After Puerto Rico’s airport was privatized, we learned that the other consultant to government, Credit Suisse, had a major stake in a corporation affiliated with a contract bidder. Credit Suisse sold its interest only after the process was well under way or, more precisely, after it was caught red-handed. A similar case is playing out in St. Louis. Reporting by the St. Louis Post-Dispatch suggested that Rex Sinquefield, the billionaire bankrolling St. Louis’ privatization effort, was in a position to profit both from the exploration process itself and the selection of a certain bidder. While Mayor Lyda Krewson dismissed this obvious conflict of interest, such connections should concern city residents.
In both cities, airport privatization has drawn players from the highest levels of big-money conservative politics. In Puerto Rico, Highstar Capital, the main financial partner in Aerostar, contributed $175,000 to the Republican Governors Association, which then ran an unprecedented ad campaign in support of Gov. Luis Fortuño. Fortuño was the initial promoter for the airport’s privatization. Overlapping personnel also linked Highstar to de la Cruz & Associates, a firm that ran Fortuño’s reelection campaign while holding more than $65 million in government contracts.
St. Louis is using Andrew McKenna, a lobbyist for the National Rifle Association and anti-labor groups, to move the privatization process forward. Privatization is not apolitical, and privatizing major U.S. airports is high on the right-wing agenda.
Considering the web tying project bidders to government officials and politics, many companies should have been barred from bidding on the privatization process in Puerto Rico. The financial-political relations around privatization has insulated the Luis Muñoz Marín airport from public accountability and from monitoring of commitments made during negotiations. Moreover, our airport has become just one more commodity in a fast-moving global financial market. Its contract has already changed hands on two occasions, as per the whims of investors with little thought to Puerto Rico’s well-being. The same could happen in St. Louis.
In July, Puerto Ricans, fed up with corruption, took to the streets to demand Gov. Ricardo Rosselló resign after leaked texts illuminated the disdain our island’s political class held for our people. To the politicians and wealthy special interests who embark on the long and slippery road of personal profit at the expense of St. Louis: Consider Puerto Rico to be your warning.
Juan Giusti-Cordero is a history professor at the University of Puerto Rico-Rio Piedras. He is co-editor of Race and Rurality in the Global Economy, Sociedad y Cultura Contemporánea: Introducción a las Ciencias Sociales and has written on the privatization of the San Juan’s airport.
EDITOR'S NOTE: This op-ed has been revised to correct inaccurate references to the involvement of Rex Sinquefield in the privatization study and bidder-selection process.