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N.C. treasurer: Airport authority raises legal issues

By Jim Morrill
jmorrill@charlotteobserver.com

Transferring Charlotte’s airport to an authority would raise thorny legal issues involving airport debt and could even affect the cost of state borrowing, the North Carolina Treasurer’s office said Monday.

Deputy Treasurer T. Vance Holloman said legal uncertainty over the airport’s $860 million debt “could result in potential prolonged litigation.”

Urging lawmakers to “proceed cautiously,” he said transferring airport management from the city of Charlotte to a new authority “could affect the cost of borrowing and desirability of North Carolina revenue bonds.”

Holloman made the comments in a letter to Sen. Bob Rucho, a Matthews Republican and a main sponsor of a measure to create an independent, 13-member authority to run Charlotte Douglas International Airport.

It’s unclear whether the report will delay or even derail the effort, which enjoyed a fast rise through the N.C. Senate and is now in the House.

Rucho could not be reached. The House sponsor, GOP Rep. Bill Brawley of Matthews, had not had a chance to review the letter.

Charlotte Mayor Anthony Foxx said Monday that the Treasurer’s office letter wasn’t surprising.

“We have been very consistent in saying this over the last six weeks,” he said. “… There is a group that believes the earth is flat. This needs to stop.”

Questions about the debt emerged this month as critics tried to slow the effort.

They said the move could create problems for bond holders and pointed to a memo from a Charlotte bond counsel. The attorney told city officials that there’s no legal provision for transferring the debt from the city to an authority – and that a transfer could require bondholder consent.

But this month Rucho used a memo from a Louisiana law firm to argue that an authority would not affect bond obligations. The memo was commissioned by the Alliance for a Better Charlotte, a group of business leaders run by former City Council member Stan Campbell.

Bolstered by the Louisiana memo, the Senate passed the bill 32-18, largely along party lines despite last-ditch pleas from Democrats who asked lawmakers to wait for the Treasurer’s report.

State Treasurer Janet Cowell, a Democrat, asked the New York-based firm, Hawkins, Delafield & Wood to evaluate the potential airport transfer after consulting with the Attorney General and Gov. Pat McCrory’s office.

In a letter to her office, the New York firm said the proposed transfer “raise(s) a number of legal issues.”

Holloman said those include potential violations of the U.S. Constitution’s Commerce Clause and possible default.

“Moreover … these issues identified with (the bill) give rise to several matters that have never been decided by North Carolina courts,” he wrote. “We believe such uncertainty could result in potential prolonged litigation.”

In a statement, Charlotte City Attorney Bob Hagemann said: “The legal issues raised are serious and warrant careful consideration, and we join the Treasurer’s Office in urging the General Assembly to proceed cautiously.”

The authority bill, fast-tracked through the Senate, appears to be slowing down in the House. It’s not scheduled for a committee vote until early April.

After the Senate vote, the city launched its own study of airport governance. A panel held its first meeting last Friday.

A draft report is due by April 25 and a final version by May 1.

In a letter last week, the Charlotte Chamber urged lawmakers to wait for the city report.

Brawley has said the House won’t necessarily wait. But, he said Monday, “We will continue to take it deliberately, giving it all the attention it deserves.”

Airport bonds are backed by airport revenues, which come from airline and parking fees and concessions.

Authority backers say that wouldn’t change. But in a news release Monday, city spokeswoman Kim McMillan underscored the city’s involvement in airport bonds.

“Should airport revenues be insufficient to pay the debt, the city could use other available funds, an option that would not be available to an authority,” she wrote. “If the airport becomes an authority, new ratings will be determined for airport revenue bonds without the benefit of the city’s strong credit…” Staff writer Steve Harrison contributed.

Morrill: 704-358-5059
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