Denver airport officials have been wooing financially troubled MarkAir with a $30 million loan guarantee backed by aviation fuel-tax money. But now the Alaska-based airline is asking for much, much more.
In a secret "economic-development plan" presented to aviation director Jim DeLong, debt-ridden MarkAir says it will relocate its headquarters to Denver and step up its local flight schedule--if it receives a laundry list of taxpayer-financed handouts, many of which appear to require the approval of the state legislature.
City officials have refused to make the MarkAir proposal public, declining even to show it to city councilmembers. A "blue-ribbon" panel appointed by Mayor Wellington Webb to evaluate the document held its first meeting last Thursday in a closed-door session attended by MarkAir owner Neil Bergt. The controversial entrepreneur is battling the Federal Deposit Insurance Corporation over millions of dollars in unpaid bank loans dating from the 1980s.
Bergt's confidential proposal, a copy of which Westword has obtained, doesn't carry a price tag. But the document, dated August 16, makes it clear that the airline is stepping up its requests in its negotiations with the Webb administration.
In addition to the city's providing $30 million in fuel-tax receipts as collateral on a private loan, the airline is asking for state enterprise-zone tax credits, personal-property tax breaks, state and local sales-tax exemptions for its aircraft parts, state training moneys of $900 per new employee and cut-rate deals from local vendors on utilities and communications equipment. And it wants the city government--which has already agreed to a deal that would give the airline up to seven months of free rent for a reservations center at Stapleton International Airport--to help it get them.
MarkAir, which emerged from Chapter 11 bankruptcy just last March and has outstanding debts of approximately $130 million, also wants the city to pay its moving costs. The estimated cost of transferring its operations from Anchorage to Denver: between $2 million and $3 million.
Despite MarkAir's financial woes, Mayor Webb has been romancing the airline since even before it got out of bankruptcy. Webb and airport officials desperately want another hub airline at Denver International Airport now that Continental Airlines has slashed its local service. The city believes that an expanded MarkAir hub would help ensure that DIA has enough planes taking off and landing to pay for the airport's operating expenses and bond debt.
DIA, however, is an increasingly tough sell. According to a city bond disclosure statement dated September 1, per-passenger costs for airlines operating at DIA will be the highest of any major airport in the United States--and more than three times the current rates at Stapleton.
Many of the items on MarkAir's wish list appear to have been styled after an incentive package that the state put together for United Airlines in 1990, when that industry giant was considering building a maintenance facility in Denver (United wound up choosing Indianapolis).
MarkAir, which operates only fifteen airplanes, lost $38 million in 1992 and $21.1 million in 1993. It posted a loss of $6.4 million in the first quarter of 1994 and $1.6 million in the second quarter. In its recent proposal, the airline says it earned an estimated $1.9 million this July and expects to be in the black for the rest of the year.
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"While the transaction is not without risks to the City, the risks are small in comparison to the significant benefits to be realized by the City, DIA and the community," states the proposal. And the document suggests that those benefits could be truly massive. Among its claims: Subsidizing MarkAir's low fares with tax dollars will actually wind up saving the metro community $400 million in travel costs--every year.
The proposal also reveals that MarkAir wants to use $9 million of the $30 million loan collateralized by the city to finance debt associated with its bankruptcy.
Critics have said that Denver's pursuit of MarkAir is a public-relations move designed to counteract negative publicity the airport has received nationally. And MarkAir's own proposal touts the airline's ability to help repair DIA's sagging image. "The Company believes DIA will be a great airport and will continue to state that publicly," says the document. "MarkAir believes in Denver, in the future of DIA and in Colorado."
Webb's blue-ribbon panel is scheduled to meet twice more before delivering a recommendation to the mayor on whether to accept the MarkAir proposal. The panel appears likely to press for a deal of some kind with the airline; its members include Webb council allies Dave Doering and Happy Haynes and the chairman of the Denver Metro Chamber of Commerce, which has been working behind the scenes to help MarkAir line up a private bank loan.