RALEIGH — Calling it a “hostile takeover” that sets a dangerous precedent of allowing the state to seize municipal assets, Senate Democrats unsuccessfully attempted to block a bill transferring ownership and operation of Charlotte Douglas International Airport from the city of Charlotte to a regional authority.
Voting 33-16 Tuesday on initial approval of the measure after rejecting three amendments proposed by Sen. Malcolm Graham, D-Mecklenburg, the GOP senators dismissed claims they could needlessly rattle municipal bond markets and were rushing the bill based on a bond counsel letter with flimsy legal merit. The bill is on today’s calendar for final Senate approval.
A floor vote on the legislation, Senate Bill 81, was delayed twice previously as its sponsor, Sen. Bob Rucho, R-Mecklenburg, attempted to get an outside bond counsel opinion from the state Treasurer’s Office to appease Democrat opponents.
During two committee meetings, the critics cited an opinion from Charlotte’s bond counsel that transfer of ownership would place at risk some $700 million in airport revenue bonds.
In asking for the vote to be delayed, Graham said the city of Charlotte is willing to pay for a study to determine the best management structure for the airport. USAirways, which operates the airport hub, has agreed to take part.
And the state treasurer’s office has not retained a bond counsel for an opinion on whether transfer of ownership will impair existing bonds. That worried Graham.
“Shouldn’t we wait until we hear from the state treasurer, who ultimately has the management responsibility for this bond, before we move down this road?” Graham said.
Sen. Tom Apodaca, R-Henderson, attempted to blunt that point, noting that the treasurer’s office is still seeking an opinion.
“This has got a long course to run. The House can take it up if something comes back differently” from the treasurer, he said.
Rucho produced a letter written by an attorney for Jones Walker, a national firm that is lead bond counsel for the state of Louisiana, in bringing the measure forward for a vote.
The letter “says that for the reasons stated above it is our view that the creation of the authority as a successor (to city ownership), which is allowed under the bond documents of the city …. will not impair contractual obligations owed to the bondholders of the airport revenue bonds and therefore should not require even bondholder approval,” Rucho said.
But Sen. Dan Blue, D-Wake, a lawyer who sometimes does bond work, was unimpressed.
“Opinion letters have to take a hard position,” he said. “This thing from Jones Walker is like a first-year memorandum” from a law student. “We’re playing with fire.”
Blue also criticized classifying the bill as local legislation. The only thing local about it is the sponsor, he said. “Everything else you’ve done is statewide.”
As he has done previously, Rucho said transfer of airport ownership to a regional authority would ensure continuity of expertise in operations and foster regional buy-in.
A regional authority is needed to protect what is a city, regional, and state asset, and to be certain an intermodal park under construction to serve as an inland distribution port for the Eastern seaboard is able to bloom and prosper, creating “tens of thousands of jobs” and millions of dollars in economic impact.
Graham took umbrage over perceived state paternalism. He said previous mayors and city councils, Republicans and Democrats alike, including current Gov. Pat McCrory, “all took care in terms of nurturing, developing, sponsoring, and supporting the growth of Charlotte Douglas International Airport” for 77 years.
“This legislation … was not submitted by the city of Charlotte,” Graham said. “The citizens of Charlotte feel there is a lack of transparency. We don’t know what the problem is first of all, second we don’t know who these business leaders are, these unnamed, faceless business leaders who propose changing the governing structure.”
He said the city has invested more than $1 billion in capital improvement bonds for airport development, “so we are investing in the future, and runways, and concourses, and cargo bays. We’re putting our money where our mouth is in terms of protecting and enhancing this regional asset.”
Construction on the intermodal park “didn’t just happen yesterday,” Graham said. “It was years of planning, years of strategy in the making.”
While Democrats probed for a justification for the legislation, Sen. Martin Nesbitt, D-Buncombe, pointed to Jerry Orr, longtime airport director who works in the city manager’s department, as a possible catalyst.
“You’ve got a city employee up there who thinks he’s a benevolent dictator and should be able to make all the calls and do everything by himself” without oversight, and gets angry when he is told what to do, Nesbitt said.
“But because one guy decides he’s bigger than everybody there, he goes and gets him a posse and they get legislation and off we go. Empire building. Fiefdom,” he said. “We’re all under threat of our neighbor deciding he likes what we’ve done and come and take it because he’s a Democrat and you’re a Republican.”
By moving to a regional authority, “You end up with an appointed board that nobody elects to hold them accountable” when local disputes arise, Nesbitt said.
“Can you imagine that we’re going to give the potential of somebody from another county who’s appointed to a board the power to condemn in your county … when they don’t own property there, they don’t vote there, they weren’t appointed by anybody there,” he said.
“They can control the vote and vote to condemn your property. Now if that’s where the leadership is taking us, good luck to you on that voyage, I ain’t going with you,” Nesbitt said.
“This is not a new power,” said Sen. Peter Brunstetter, R-Forsyth. He said Piedmont Triad Airport Authority had that power when he served on its board.
Nesbitt also raised the specter of legal action if the legislation is passed.
“Do you think you can go in and do a hostile takeover and take these people’s airport and there isn’t going to be a bondholder who will sue you? Of course they’re going to,” he said.
“Anybody can sue anytime they want,” Rucho said, downplaying the concern.
“This could ripple down to every one of your communities” because the financial markets may be averse to issue bonds to municipalities knowing that the state could step in and transfer control of the asset being financed, Nesbitt said.
Sen. Daniel Clodfelter, D-Mecklenburg, said one-quarter of all AAA ratings in the U.S. are in North Carolina. That is the best credit rating available.
“I don’t want to monkey around with that. I want to know what the treasurer says. And I think that’s the responsible thing for us to do,” Clodfelter said.
Graham said Charlotte’s bond counsel’s opinion stated the legislation would have enterprise debt financing impacts “including water and sewer, stalwart, and transit,” and the city should consider whether it needs to disclose in future bond projects that the General Assembly could transfer ownership of a city enterprise without consent or approval of the city.
Dan E. Way (@danway_carolina) is an associate editor of Carolina Journal.