CTroyMathis
13 August 2003, 06:18 PM
City should get new deal with AMR in writing
By Mitchell Schnurman
Star-Telegram Staff Writer
http://www.dfw.com/mld/startelegram/business/columnists/mitch_schnurman/6443271.htm
American Airlines ought to be ashamed of how it's treating its best friend.
The company has wrung hundreds of millions of dollars in perks and tax breaks from Fort Worth over the years, and now it's back again, looking for another handout.
It wants even more help for its maintenance facility at Alliance Airport, where it already enjoys a deal to die for.
If Fort Worth balks, there's the threat that the facility could be shut down, idling 2,300 workers and a $400 million hangar that was paid for with city revenue bonds.
I don't see that happening -- Fort Worth resisting or the hangar being closed.
But I'm hoping that the city plays hardball and demands that it gets something back, too.
Start by reminding American just how loyal a partner Fort Worth has been.
The city subsidized American's headquarters move in 1979; issued bonds for American's flight simulators in '87; financed the Alliance facility in '89; and recently supported a $1 drop-off fee at D/FW Airport.
All of that helps American's bottom line.
Most important, Fort Worth has been American's pit bull on the Wright Amendment -- an outdated piece of legislation restricting long-haul flights from Love Field, home of discount-king Southwest Airlines.
Some claim that the amendment helps Tarrant County and D/FW, while others decry it. What's not disputed, at least outside American, is that it has produced millions of dollars in extra profits for the airline.
When the amendment was on the ropes six years ago, it was Fort Worth that promptly sued the city of Dallas and eventually appealed the case to the U.S. Supreme Court. Fort Worth spent at least $1.5 million on legal fees and exhausted a lot of good will defending a rule that costs its residents daily.
Try to find somebody else who can offer that kind of corporate help. No way.
Times change, of course, and now the story line at American is all about its financial troubles. The company averted bankruptcy in April by taking a knife to its labor costs and operations, and now it's the communities' turn to share the pain.
The airline has to shrink to survive, so it's considering closing one of its three maintenance bases. American announced that possibility recently, and that touched off a bidding war with Tulsa, Okla., Kansas City, Mo., and Fort Worth.
Surprise, surprise.
Most companies that whipsaw cities in this fashion have already decided where they're going; they just want the best terms they can get.
Tulsa and Kansas City are pushing incentives ranging from $11 million to $200 million. Fort Worth officials met with American on July 21 and are working on their offer.
Maybe this is how business is done, but it just feels wrong. And officials in Fort Worth are plenty disappointed about having to go through another beauty contest to prove their devotion.
The encounter says a lot about American's corporate culture and its approach to the marketplace. The company has always been willing to throw its weight around, whether to squash a competitor or get some help from the government.
As the area's biggest employer -- and possibly its most important -- American has some right to play the bigfoot. It has contributed that much to the local economy.
I'm just weary of Fort Worth being played for a chump.
American executives would say they're just doing their job, cutting the best deal for the airline and its employees and shareholders. Why conduct business somewhere that's not competitive, they'd say.
Translation: Ante up, if you want to be in the game.
Lots of other companies do this, too, from Boeing to Toyota to the Dallas Cowboys, and it usually pays off.
Heck, American went through this exercise with Fort Worth before. In 1989, it flirted with Oklahoma City, securing a lucrative bid that forced Fort Worth to spring into action for the Alliance maintenance facility.
What a deal American got.
American pays no property taxes, because the city owns the hangar and leases it to the company for the price of the debt payments. The city used its borrowing power to get a lower interest rate, saving American those expenses. It also gave American a 15-year tax abatement on all the property inside the building.
Then the Texas Legislature pitched in, hurriedly approving two bills to lower American's costs further.
On the entire project, the company expected to save at least $200 million from the assorted breaks.
At the time, American projected that it would have 4,500 employees at the facility by 1994. Almost a decade later, it has half that number.
Maybe it's wishful thinking that American would make good on that promise before it hits us up again?
Lesson for the city: Get it in writing this time.
I see that as the best way out of this unsavory situation, trading some public help for new jobs.
Say that American closes the Kansas City base and shifts workers down here; then Fort Worth could extend the tax breaks on the property inside the hangar, which are set to expire after 2005.
The more jobs added, the longer the extension.
If American wants to build an addition at Alliance, the city could also reach into its conventional bag of incentives.
Lots of folks won't like such a deal regardless of the details, because their companies actually pay taxes. In their first 15 years and the next.
That populist argument always has merit and support. But Fort Worth and other cities have been doling out economic incentives for years.
Our best bet is to cut a reasonable deal with American that includes a performance clause tying tax breaks to new jobs.
That kind of arrangement would give Fort Worth some protection and save some face. And it would show that the city has learned from its experience.
In April 1989, American executives launched a major PR offensive to rally public support for the Alliance tax breaks. The Star-Telegram ran a long story quoting senior executives, who wanted to send a tough-love message.
The Page 1 headline: " 'Just how badly do you want us?' American asks."
American's finances may be different today, but its campaign strategy is the same. And so's the target.
By Mitchell Schnurman
Star-Telegram Staff Writer
http://www.dfw.com/mld/startelegram/business/columnists/mitch_schnurman/6443271.htm
American Airlines ought to be ashamed of how it's treating its best friend.
The company has wrung hundreds of millions of dollars in perks and tax breaks from Fort Worth over the years, and now it's back again, looking for another handout.
It wants even more help for its maintenance facility at Alliance Airport, where it already enjoys a deal to die for.
If Fort Worth balks, there's the threat that the facility could be shut down, idling 2,300 workers and a $400 million hangar that was paid for with city revenue bonds.
I don't see that happening -- Fort Worth resisting or the hangar being closed.
But I'm hoping that the city plays hardball and demands that it gets something back, too.
Start by reminding American just how loyal a partner Fort Worth has been.
The city subsidized American's headquarters move in 1979; issued bonds for American's flight simulators in '87; financed the Alliance facility in '89; and recently supported a $1 drop-off fee at D/FW Airport.
All of that helps American's bottom line.
Most important, Fort Worth has been American's pit bull on the Wright Amendment -- an outdated piece of legislation restricting long-haul flights from Love Field, home of discount-king Southwest Airlines.
Some claim that the amendment helps Tarrant County and D/FW, while others decry it. What's not disputed, at least outside American, is that it has produced millions of dollars in extra profits for the airline.
When the amendment was on the ropes six years ago, it was Fort Worth that promptly sued the city of Dallas and eventually appealed the case to the U.S. Supreme Court. Fort Worth spent at least $1.5 million on legal fees and exhausted a lot of good will defending a rule that costs its residents daily.
Try to find somebody else who can offer that kind of corporate help. No way.
Times change, of course, and now the story line at American is all about its financial troubles. The company averted bankruptcy in April by taking a knife to its labor costs and operations, and now it's the communities' turn to share the pain.
The airline has to shrink to survive, so it's considering closing one of its three maintenance bases. American announced that possibility recently, and that touched off a bidding war with Tulsa, Okla., Kansas City, Mo., and Fort Worth.
Surprise, surprise.
Most companies that whipsaw cities in this fashion have already decided where they're going; they just want the best terms they can get.
Tulsa and Kansas City are pushing incentives ranging from $11 million to $200 million. Fort Worth officials met with American on July 21 and are working on their offer.
Maybe this is how business is done, but it just feels wrong. And officials in Fort Worth are plenty disappointed about having to go through another beauty contest to prove their devotion.
The encounter says a lot about American's corporate culture and its approach to the marketplace. The company has always been willing to throw its weight around, whether to squash a competitor or get some help from the government.
As the area's biggest employer -- and possibly its most important -- American has some right to play the bigfoot. It has contributed that much to the local economy.
I'm just weary of Fort Worth being played for a chump.
American executives would say they're just doing their job, cutting the best deal for the airline and its employees and shareholders. Why conduct business somewhere that's not competitive, they'd say.
Translation: Ante up, if you want to be in the game.
Lots of other companies do this, too, from Boeing to Toyota to the Dallas Cowboys, and it usually pays off.
Heck, American went through this exercise with Fort Worth before. In 1989, it flirted with Oklahoma City, securing a lucrative bid that forced Fort Worth to spring into action for the Alliance maintenance facility.
What a deal American got.
American pays no property taxes, because the city owns the hangar and leases it to the company for the price of the debt payments. The city used its borrowing power to get a lower interest rate, saving American those expenses. It also gave American a 15-year tax abatement on all the property inside the building.
Then the Texas Legislature pitched in, hurriedly approving two bills to lower American's costs further.
On the entire project, the company expected to save at least $200 million from the assorted breaks.
At the time, American projected that it would have 4,500 employees at the facility by 1994. Almost a decade later, it has half that number.
Maybe it's wishful thinking that American would make good on that promise before it hits us up again?
Lesson for the city: Get it in writing this time.
I see that as the best way out of this unsavory situation, trading some public help for new jobs.
Say that American closes the Kansas City base and shifts workers down here; then Fort Worth could extend the tax breaks on the property inside the hangar, which are set to expire after 2005.
The more jobs added, the longer the extension.
If American wants to build an addition at Alliance, the city could also reach into its conventional bag of incentives.
Lots of folks won't like such a deal regardless of the details, because their companies actually pay taxes. In their first 15 years and the next.
That populist argument always has merit and support. But Fort Worth and other cities have been doling out economic incentives for years.
Our best bet is to cut a reasonable deal with American that includes a performance clause tying tax breaks to new jobs.
That kind of arrangement would give Fort Worth some protection and save some face. And it would show that the city has learned from its experience.
In April 1989, American executives launched a major PR offensive to rally public support for the Alliance tax breaks. The Star-Telegram ran a long story quoting senior executives, who wanted to send a tough-love message.
The Page 1 headline: " 'Just how badly do you want us?' American asks."
American's finances may be different today, but its campaign strategy is the same. And so's the target.