Government

Parking protest: Spurned operator questions airport contracting methods

January 17, 2005

The nation's largest parking operator is complaining that Indianapolis International Airport canceled its joint-venture contract and handed the business to the local half of the venture without seeking competing proposals.

Nashville, Tenn.-based Central Parking Corp. said that, given the chance, it would have offered the airport more to manage the Premier Business Class parking lot than its now-former partner, Global Parking System of Carmel, did.

A counteroffer from Central came after the Indianapolis Airport A u t h o r i t y i n e a r l y August struck a deal with Global that seemed to blindside the publicly traded parking giant. Central has filed a lawsuit against Global and a former employee.

Global's four-year contract, which went into effect this month, promises the airport $1.3 million a year plus a percentage of certain revenue. Global estimated the package will net the airport $1.5 million in 2005 and a little less than $1.7 million in 2008, according to documents filed with the Airport Authority. An offer Central made after learning about Global's solo deal guaranteed the Airport Authority $1.9 million a year.

What might ordinarily be dismissed as sour grapes from a spurned contractor has a different flavor just six months after former airport director David Roberts accused Lacy Johnson, a prominent Democrat whom Mayor Bart Peterson named as airport board chairman, of engaging favored contractors for key assignments.

Roberts' intent-to-sue notice was filed in June with Attorney General Steve Carter and the Indiana Political Subdivision Risk Management Commission.

Not inviting competing proposals, followed by Central's expressed willingness to offer a more lucrative deal, also is notable because it comes as struggling airlines complain about having to pay higher landing fees and rents to help finance the $974 million midfield terminal set to open in 2008.

Maximizing non-airline revenue while improving service has been the cornerstone of the Indianapolis Airport Authority's decade-old contract with British airport management firm BAA to operate Indianapolis International and several reliever airports in the metro area.

The more the airport collects through other revenue, the less it has to rely on airlines to fund capital projects. As it is, airlines could fork over the equivalent of $9.65 per passenger annually by the time the terminal opens vs. $6.56 in 2005.

Three carriers at Indianapolis, including locally based ATA Airlines, are in Chapter 11 bankruptcy reorganization. ATA Chairman George Mikelsons has questioned Peterson's timing for the new terminal while airlines are "bleeding to death."

In an Aug. 31 letter to Airport Director Patrick Dooley, an executive of publicly traded Central seemed stunned to learn his joint-venture partner in Circle City Parking, Global CEO Hal Darring, now had the Premier lot contract.

"Given the public nature of the airport, we were surprised that you would cancel our agreement in favor of Mr. Darring without obtaining any other proposals," Central's senior vice president, Alan J. Kahn, wrote.

Unlike construction contracts, there is no legal requirement to seek competitive proposals for airport operations agreements. Most retail and food/beverage agreements are negotiated without inviting proposals, said BAA spokesman Dennis Rosebrough, because the airport staff has ample experience with a relatively small universe of airport vendors in terms of their capabilities and ability to generate revenue.

Dooley responded to Kahn in a Sept. 17 letter: "The practice is to negotiate the optimum deal with an operator that will deliver the desired level of service and products. This should be familiar to you as this is the practice we observed in negotiating your original agreement [in 2002]."

The airport in 1996 did seek proposals from prospective lot operators, however, when it first privatized the lot's management. It eventually chose Indianapolisbased Denison Parking Management.

Dooley told IBJ that situation was different because the perks offered through the lot's new focus on business passengers, perks like rain ponchos and snow removal from parked cars, had not been tested locally. The authority wanted to gauge the market by inviting multiple proposals.

"I don't think we even understood what the marketplace [for this service] was," he said.

A more recent exception, Rosebrough said, happened when BAA solicited bids from several financial institutions to install ATMs in the terminal because of the potential for lots of competitive offers.

Central and Global's Circle City Parking venture took over the 1,450-space Premier lot in 2002 after Denison voluntarily terminated its contract in the post-Sept. 11 slowdown. Central was to mentor Darring, a black businessman, who would own about 30 percent of the venture. The partners' 2002 contract called for paying the Airport Authority the equivalent of $1.2 million a year, plus 60 percent of revenue above $2.3 million. The lot generates gross sales of about $3 million annually.

Circle City's agreement changed to a month-to-month arrangement starting in 2003. Nothing prevented either partner from making its own management offer, according to airport officials.

Darring "came on his own" with a proposal, Dooley said.

"He's hungry. He continually asked us if he could run his own operation. The person we saw every two weeks was Hal Darring. He was the one here day-to-day running the business, attending the board meetings, giving us reports and updates. He gave us a high comfort level."

In the deal Darring struck with airport staff last summer, his Global Parking agreed to pay the airport $1.3 million annually, plus 65 percent of revenue from $2.66 million to $3 million, and 70 percent of revenue above that amount.

Darring's proposal estimated the airport will receive $1.5 million in 2005, an amount rising to $1.69 million by 2008. Central Parking would have guaranteed the airport $1.9 million a year or 62.5 percent of revenue, "whichever is greater," according to its letter.

Dooley said airport staff deemed Darring's offer lucrative long term. They believed Darring was conservative in his revenue projections, plus they factored in responsiveness and customer service he's provided at the lot already.

"We're not always focused on the dollar," Dooley said.

Airport management veteran Roberts, Dooley's predecessor, said BAA in recent years has become focused on pleasing an airport board concerned with political payback.

Roberts, who filed his complaint with state officials as a required precursor to a potential lawsuit, claimed he was dismissed by BAA for voicing concerns about Johnson and other board members.

In 2000, Mayor Peterson appointed Johnson as the first black chairman of the airport board. Johnson is a friend of Peterson's and has opened his home to fund-raisers for the mayor.

"Johnson attempted to influence employment of minorities, unionization of employees, allocation of space to airlines and concessionaires ... engagement of favored contractors [and] suggested removal of BAA employees who were considered politically too Republican," Roberts charged in his complaint.

Among those Johnson sought to employ at the airport was an embalmer for whom there were no suitable job openings-a protégé of Johnson's godmother, U.S. Rep. Julia Carson, Roberts said.

Records compiled by Campaign-Money.comshow Darring made three campaign contributions to Carson while he was negotiating with the airport to run Premier solo.

Darring gave Carson's campaign $1,950 between April, when talks began, and July, when negotiations concluded. Darring's firm gave $250 to Peterson's re-election campaign in 2003.

Darring did not return phone calls.

Johnson said he "didn't even know Hal Darring made a contribution" to Carson.

At Airport Authority board meetings, Johnson has frequently asked airport staff if they have earnestly sought minority and female contractors, as is the Airport Authority's stated goal. Minority groups in previous years criticized the board for not reaching out to disadvantaged businesses, such as during the construction of the United Airlines maintenance base in the early 1990s.

Contract dollars flowing to minority firms have more than doubled since Johnson took office, from $5.3 million in 2000 to $11.2 million in 2003.

Johnson, an attorney at prominent Indianapolis law firm Ice Miller, disputed Roberts' allegations of political opportunism. He said he never encouraged Darring to make a proposal to run the Premier lot, nor did he suggest BAA consider him.

Johnson said he and other board members received a favorable report from BAA staff in August and concluded Darring's Global Parking operation was suitable for a long-term agreement. The board approved the deal Aug. 6.

The staff report said the objective for the Premier lot was top-notch customer service, development of "frequent user" programs, "increased revenue to the authority and 100 percent [minority business enterprise] participation."

Meanwhile, Central Parking is going after Darring and a former Central employee, Scott Kloes, in a lawsuit filed Nov. 23 in Hamilton Superior Court.

Central Parking alleges Darring violated his contract obligations in their joint venture by failing to disclose he was striking his own deal with the airport.

The suit seeks unspecified damages from Darring and accuses Kloes of violating an employment agreement. Darring's attorney, David Given, has yet to file a response, but said, "We don't believe there's any merit to [the suit]."

The Airport Authority is not named as a defendant.

As for the allegations from Roberts, the former terminal manager at Heathrow, Glasgow and Gatwick airports in the United Kingdom has yet to file a suit. Roberts said he put the case on hold because of a relapse of a serious illness.

Allegations that political ties sway contract awards are easy to make but often difficult to prove.

IBJ last month reported nearly twothirds of long-term contracts awarded by the Airport Authority on the midfield project have been to firms that directly or through their top executives made campaign contributions to Mayor Peterson.

Government entities would do well not to give the public reason to question them later, said Geoffrey Segal, a policy analyst and outsourcing expert at Los Angeles-based Reason Foundation.

Even if airport officials weren't required to seek proposals for the parking concession, "A true, open, transparent competition delivers the best results and the highest value," Segal said, and, "you open up the possibility for greater innovation."

A municipal agency can still give consideration to minority- and women-owned businesses by assigning them extra weighting to ensure they are not disadvantaged in the selection process, he said.
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