A Starry-Eyed Proposal To Rescue an Airport and Revitalize a Region

In 1998, the airport authority in St. Louis approved the construction of a third runway at its 70-year-old airfield (the first municipally-owned airport in the United States) – knowing that this would require the demolition of nearly 2,000 homes and the displacement of 5,000 people. The planners expected to reap large rewards in reduced flight delays and increased traffic that would offset the high cost of acquiring land and compensating home-owners.

To say that things have not gone according to plan at Lambert-St. Louis International Airport is a considerable understatement. During the 1980s and 90s, Lambert ranked as the nation’s ninth or tenth busiest airport. Today it is no longer among the top 30. Since the year 2000, it has experienced a 60 percent decline in enplanements. Lambert also went from debt-free to being saddled with $877 million in long-term debt when the third runway opened for public use in 2006.

Because of the adverse combination of reduced traffic and heavy debt (now equal to seven times annual revenues), Lambert has been forced to raise its landing fees to more than double or even quadruple those of competing airports, and that, in turn, has caused a number of carriers to vote with their wings in shunning the airport.

The third runway is seldom used. It isn’t needed at today’s traffic levels (less than one third of what the airport’s planners were anticipating), and remaining airlines avoid using it unless forced to do so by bad weather (the two pre-existing runways are too close together to permit simultaneous instrument landings) because it is farther away from passenger terminals. Even the “International” in airport’s formal name has become a misnomer, as St. Louis has the unenviable distinction of being the biggest metropolitan area in the nation with no direct scheduled air service outside of North America.

All of which has led to an improbable question as political and civic leaders in the St. Louis region ponder the future: Can the self-styled “Gateway to the (American) West” reinvent itself a futuristic, airport-centered Gateway to the Far East?

Joined by the Saint Louis Regional Chamber and Growth Association (RCGA), political leaders in St. Louis City and County have appealed to the state of Missouri for assistance in boosting the ailing airport. That is to be expected. What is remarkable, however, is the broad bipartisan support that has emerged at the state level for a hastily conceived plan – described by RCGA and others as “The Big Idea” – aimed at inducing the Chinese government and world air carriers to establish a major air cargo hub at the under-utilized Lambert-St. Louis airport.

The proposed legislation would dole out $360 million of state tax credits for the purpose of creating a “China Hub” or “Aerotropolis” at Lambert. And that in itself is a tell-tale sign of an“investment opportunity” that is an accident waiting to happen. As we have argued in number of commentaries, targeted tax credits are very similar to “earmarks” – narrow public subsidies handed out to powerful special interests. We have shown that several of the likely applicants for Aerotropolis tax credits are warehouse and real estate developers already eligible to receive millions of dollars of state and local tax incentives.

In truth, for all that it has been touted as the “Big Idea,” the Aerotropolis plan seems to consist of little more than a hope and a prayer, accompanied by a good deal of political grandstanding with unrealistic projections of massive job growth and economic stimulus. The RCGA produced an eight-page statement making the claim that $300 million in public incentives for the Aerotropolis – to facilitate the construction of new warehousing space – would pay for itself more than 100 times over in just two decades – leading to $34 billion in private economic activity. Saying little about the methodology that was used, the organization cited a single computer forecasting model to support this extraordinary claim.

Neither the RCGA nor any other organization has produced a detailed feasibility study. No one supporting the Aerotropolis has produced evidence that Chinese authorities and major carriers are contractually or otherwise committed to turning Lambert into a major air cargo hub – provided that the airport is able to meet certain conditions in the provision of additional warehousing space and other facilities. In fact, we have shown that St. Louis already has acres and acres of surplus warehousing space in the immediate vicinity of the airport – enough, according to Michael Webber, an international air cargo consultant, to provide for the projected traffic of eight weekly freighters cited by Aerotropolis supporters.

So where is the evidence that massive tax credits are the magic ingredient needed to turn St. Louis into one of principal caravansaries along the aerial Silk Road of the future – connecting China and other Asian nations to the American Midwest, with onward connections for air cargo to other parts of the world as well?

There is none that we found in months of diligent searching. Instead, proponents rally support by making it sound as though other airports – in Detroit, Chicago, Cincinnati, Indianapolis or other cities – will seize the gold ring for themselves if the city and state fail to take preemptive action. It’s the old argument – Build it and they will come.

At the Show-Me Institute, we have cited numerous instances, both in the St. Louis region and around the state, where targeted tax credits have failed to produce promised economic results. The list includes failed shopping centers, a stalled “Ballpark Village” in downtown St. Louis, and other supposed economic wonders that have turned sour.

Meanwhile, the cost of this misguided corporate welfare has mounted. Over the past 12 years, tax credit redemptions in the state of Missouri have quintupled – growing from $103 million to $522 million per year. Every time our lawmakers pass out more “gifts” to some businesses, they are forced to dig deeper into the pockets of other taxpayers – both businesses and individuals.

That is not fair. And it is not smart public policy either.

More than a decade ago, Lambert-St. Louis International Airport rolled the dice on an ill-advised gamble on future growth that wasn’t there. Let’s hope it’s not about to repeat the same mistake.

Andrew B. Wilson is a fellow and Patrick Ishmael is a policy analyst at the Show-Me Institute, which promotes market solutions for Missouri Public Policy.