Federico's Folly
Fumento, Michael
Michael Fumento Federico's Folly Secretary of Transportation Federico Pena got his job by wasting $10 billion on the biggest public works disaster of modern times— an airport worse in every way...
...Besides the airport, Clinton credited his nomination to theU.S...
...Further, yet another runway was planned for Stapleton, to be built on the adjoining Rocky Mountain Arsenal, which would have increased capacity and decreased delays even further...
...The airport has now fallen behind schedule...
...Consider the cost of flying round-trip for a three-day weekend to Los Angeles, currently available at the best rates for about $200...
...Earlier this year, the official opening date was moved from October to December...
...Some have called it the nation's largest white elephant...
...Asked why an airport built "in order to create jobs" would prompt such a thing, Continental corporate affairs spokesman Dave Messing said, "It was felt it would be a foot in the door to the possible resurrection of passenger service at Stapleton...
...This was the infamous Silverado Savings & Loan, co-directed by George Bush's son Neil...
...Pena presented the costs as practically irrelevant, since Denverites weren't going to have to pay...
...Thus, even as the airport budget ballooned, the size shrank, leading Gene Amole to dub it "The Incredible Shrinking Airport...
...It will be a daunting project...
...It did not include such "incidental" items as the purchase of the land itself or capitalized interest on the bond debt...
...Consider Secretary of Transportation Federico Pefia's monumental mistake: the soon-to-be-completed Denver International Airport...
...Such increases can have a tremendous effect on such an elastic commodity as leisure airline travel...
...Denver International, said the report, was characteristic of the fact that "America is planning new airports for the 1980s, not the 21st century...
...He gave two reasons...
...Further, City Auditor Bob Crider's annual report includes $5.6 billion in bond interest, hardly an incidental cost...
...In selling the airport idea to Congress, Pena said that eliminating the alleged delays at Stapleton would save the airline industry $120 million a year in operating costs...
...It was supported by both Denver newspapers as well as the governor and -the entire Colorado congressional delegation...
...Responding to a lawsuit, the Greater Denver Corporation, an arm of the local Chamber of Commerce, later released a list of political contributors to the airport for which it had served as a funnel...
...Denver International critic Michael Boyd, president of Aviation Systems Research Corporation, a Colorado consulting company, responds that this doesn't ring very true...
...While nothing can possibly make it more convenient and less expensive than Stapleton, unforeseen shifts in airport use patterns may allow it to run at a profit...
...In any profit-making business in the world he would have been dumped unceremoniously from his job...
...The most effective tool for ensuring a healthy margin of victory for the airport was simply lying to the electorate as to what it was getting and what it was going to be paying for it...
...Pelia's explanation was that "Denver's investments paid off...
...airports in number of delays per thousand flights...
...Two years earlier, in a 1987 report, the city itself boasted that "Denver ranks below most other major U.S...
...This sounds like an easy out for the city, but it could devastate its ability to sell bonds in the future...
...Ironically, due to an FAA error in applying sea-level standards to a mile-high airport, the runways at the new airport have also been built too close together to comply with regulations for full flexibility in simultaneous take-offs and landings...
...Michael Fumento Federico's Folly Secretary of Transportation Federico Pena got his job by wasting $10 billion on the biggest public works disaster of modern times— an airport worse in every way than the one it replaced...
...Thus, far from not costing Denverites more, the new airport began costing them more a year before the structure was even scheduled to open...
...He also found that "MDC _Holdings and its officials committed numerous criminal violations" in raising political funds for the airport by "extorting" subcontractors to raise contributions, but that the company could not be prosecuted because the statute of limitations had expired...
...Airport officials say that existing structures prevented it from being made any longer, though one could argue that compared to the billions of dollars the new airport would cost, relocating those facilities would have been a bargain...
...Finally, it began using a figure of 23 miles...
...One owner of land adjacent to the airport site that stood to make a fortune selling to hotels and other businesses contributed $95,000 to Greater Denver...
...It appears that it will be worse in almost every practical way than the perfectly serviceable airport it is replacing...
...The 24.5-mile distance will make the downtown-to-airport distance the second most remote in the nation, with only Washington's Dulles beating out Denver International, by six-tenths of a mile...
...As a reporter for Denver's Rocky Mountain News put it, "Clinton essentially said: Do what you did in Denver on a national scale...
...Even after Pena began his airport campaign, Stapleton built a new runway, a new concourse, and a new commuter terminal...
...Thus, independent of air traffic trends, the new airport could be slicing its own throat...
...Some critics of the new airport claim that the $20 mark is almost inevitable, and may even be exceeded...
...Peila's tenure was marked by expensive megaprojects, ranging from hosting a Grand Prix to building a convention center and a baseball stadium...
...6 6here is greatest practical benefit in making a few failures early in life...
...While not full-length, it freed up the longer runways to handle more large jets, and significantly eased congestion...
...Reading Pefia's Lips Pena adamantly opposed submitting the airport to a referendum, as did Gov...
...But when someone actually measured the distance, they found it would be a 24.5-mile trip...
...The problem with the projection was that it couldn't have taken into account that Stapleton added a new runway in 1986...
...And even that figure could rise...
...The city responded that the 18 miles was "as the crow flies...
...Doughty resigned last year...
...But it isn't for nothing that the route from the interstate to the airport will be named Pena Boulevard...
...The current rate at Stapleton equates to a little less than $6.00, and originally Denver International proponents claimed it would be no higher at the new airport...
...The bondholders don't seem particularly worried, since the bonds are currently selling above their face value...
...He favored either generating power on-site on land adjacent to airport land or at least having the city own the utility equipment at the airport rather than "permanently lock the airport into a higher tariff...
...By comparison, Atlanta's Hartsfield International, which has only one hub, had 25, New York's JFK had 76, Chicago O'Hare 88, Newark 98, and LaGuardia 115...
...But unforeseen fortuities will not change the fact that Coloradans were continually and apparently intentionally misled...
...The greatest contributors by far were the area utilities, with US West Communications giving $400,000 and the electric utility, Public Service Company, kicking in $300,000...
...Backers of the new airport have never even claimed that they could get an airline to take Frontier's place as a third hub...
...All of which pushes costs to about $10 billion, or almost six times what voters were told the project would cost...
...Also contributing to the decline was the folding in 1986 of Frontier Airlines, one of the three airlines using Stapleton as a hub...
...Business interests behind the airport managed to raise four times as much money as the opposition and the referendum—worded to begin, "In order to create more jobs . . ."— passed handily...
...As airport officials admit, the lower number of gates is because even many of the Stapleton gates were no longer needed for lack of air traffic...
...No blood test is necessary...
...In 1978, when the airlines were deregulated, there were only four hubs...
...It should be noted, however, that Southwest is not currently flying out of Stapleton, either...
...The same deregulation that led to vastly increased ridership led to decentralization of hubs...
...With a certain degree of chutzpah, Pena said that before the referendum he had made it no secret that the distance was "between 23 and 24 miles," yet even for some time after the News exposé the city continued to use the 18-mile figure in press releases, fact sheets, and reports on the airport...
...Though the city has upped its figure only to $3 billion, the actual amount budgeted to be expended by opening day is now about $4.4 billion...
...Denver's average went down...
...But Denver's investments have not paid off, at least not for the city...
...Later, though, city officials said it was because the Arsenal land was too polluted...
...And certainly the airport isn't the only reason Pena is in the cabinet...
...Moreover, Stapleton's flight-delay record in recent years has been among the best in the nation...
...In its original bond prospectus, the city said that even after clean-up costs it expected to get $100 million for Stapleton...
...Far from attracting new bookings, as promised, the convention center has seen a tremendous drop in bookings since it opened, a decline that set in long before any talk of gay boycotts...
...In December 1990, Continental filed for bankruptcy protection, putting in doubt whether it would ever operate out of a new airport—although more recently it said it is fairly confident of pulling out of the red...
...Pei-la blocked its construction, along with that of terminal improvements...
...Bill Richardson (D-N.M...
...To sustain themselves, airports need to charge fees to the airlines, which are worked into the cyst of airline tickets...
...And most likely, building the new airport will end up reducing air traffic through Denver...
...In the early 1980s, as a result of deregulation and lower fares, the airline business boomed and hubs did especially well...
...Inclement weather has closed the airport as a whole only three times in its history...
...Conference of Mayors' having given Pena its City Livability Award for reducing its Clean Air Act violation days from "150 a year in the 1970s to 3 in 1990...
...Indeed, every city that has an airport more than 18 miles driving distance from downtown has a second full-service airport less than 11 miles from the city center...
...Occupying a parcel of land twice the size of Manhattan, Denver International is the nation's largest public works project...
...According to the Federal Aviation Administration, in the year the airport was submitted to a referendum, 1989, Stapleton had 27 flight operations per thousand delayed fifteen minutes or more...
...And the man responsible for it is now responsible for billions in federal transportation expenditures...
...More on the increased parking and cab fares later...
...As to what will become of the land on which Stapleton sits, no one knows...
...But at least one bond-rating agency, Kemper Securities, Inc., rates the bonds at lower BBB, one rank above junk...
...In fact, the national average for delays went up in 1986...
...But if Pella couldn't have made it without the pedigree, he couldn't have made it without the airport, either...
...But when a few years later a blizzard dumped a considerably smaller amount, again the city became snarled, this time because Pena had the novel idea of sending heavy city trucks out to simply pack down the snow by driving over it...
...Right now, we don't intend to impose a surcharge because there is no need for it...
...Noted a spokesman for the Air Transport Association in Washington, "The marketplace is very sensitive to increased ticket costs...
...Now the number airport analysts are tossing around is $15.50, which is based on a steady increase in passengers over those currently using Stapleton...
...At first billed as "the world's second-largest airport," it has steadily shrunk in size even as its budget has ballooned—from the $1.7 billion Denverites voted for to an actual cost of at least $10 billion...
...But passengers originating out of Denver will be the real sufferers...
...When pressed on this possibility, Aviation Director George Doughty said flatly, "If the airport revenues are inadequate, the bonds will not be repaid...
...But in that strange twilight between politics and reality, sometimes mistakes themselves can be a benefit...
...An April 1991 poll showed 51 percent would vote against the airport if the issue were on the ballot then, although 70 percent said that since the building had begun, it should be carried through...
...Fortunately for him, it was not an election year...
...Yet even that would not have been entirely correct...
...A more direct beneficiary was MDC Holdings, a major contributor not only to Greater Denver but to Peria's mayoral campaign...
...The new airport has already raised that cost by $3, will probably raise it by another $15 or more in airline fees, and by $18 in parking costs or $60 in cab fare...
...The economics of the new airport are so bad that even if it were completed it would be fiscally smarter to just let it rot and to continue to use Stapleton, using Stapleton profits to pay off the bonds...
...Denver International is his baby...
...City council member Dave Doering, a strong supporter of the new airport, nevertheless argued in 1990 that the city was entering into a "sweetheart deal for the utilities," in which Public Service would remove high voltage lines at a cost to the utility of about $16-20 million, but in exchange would gain up to $170 million over the next twenty years...
...But there is no market price for old airports and the city has no idea to whom it will sell it, especially with Lowry Air Force base scheduled to shut down in 1994 and become another large tract of unused land...
...Other costs that the city should have known about were also left...
...The Nightmare Before Christmas Other than the overwhelming support he received from the city's Hispanic population, Pena probably owes his getting elected mayor to a Christmas Eve blizzard—the worst in sixty-nine years—that dumped almost three feet of snow on some parts of the city and tied the area up for days, making the incumbent look inept...
...to the Interior Department position and instead appointing a very green but nonetheless white Bruce Babbitt—felt compelled to appoint a secretary of transportación...
...Both United and Continental conducted independent evaluations and estimated that the actual amount that would be needed would be $2.7 billion...
...As he exhorted in a newspaper commentary, "Denver is poised for greatness...
...The bottom line is that last year Stapleton produced revenues of about $164 million, while Denver International will need at least $340 million to break even...
...But the mushrooming from $1.7 billion to $2.7 billionwasn't the worst of it...
...City Hall had told voters that the new airport was to be 18 miles from the center of downtown...
...Said Boyd, "It would have given Stapleton the same capacity that the new airport is supposed to have...
...By 1990 there were thirty-five, many of which had lower landing fees than Stapleton's and were siphoning off business...
...Pena said the common theme of these projects was to help pull America's 23rd largest city out of an economic slump and to make it one of the country's most spectacular...
...Critics say, however, that the common theme was for Pella to soak the citizens by handing over city funds to businesses, especially contractors, that took advantage of Denverites' self-consciousness about being a "cow town," and worries over a temporary job bust at the end of an oil boom...
...But although Coloradans would end up paying little for the airport in direct taxes, they would be clobbered by other costs...
...And Dulles, near a major population center in Northern Virginia, is more convenient for some users...
...This is like putting arefrigerator into an otherwise empty convention center and calling it the world's largest kitchen...
...The baseball stadium is still under construction...
...As this article goes to press, the date has been pushed back even further—to March 9, at the earliest...
...Two years later, the hypothetical circumstances kicked in, with Denverites and those changing planes at Stapleton paying a $3 head tax, which will probably remain in effect for the next three decades...
...The city had to forgive $40 million of United Airlines' bond debt as a lease concession, meaning $40 million less coming into its coffers...
...So far, Pena too has been an unstoppable force...
...Where Have All the Passengers Gone...
...The state attorney general found in an investigation that MDC had sold the city 100 acres for the airport...
...t is not a foregone conclusion that Denver International I will be a flop...
...Then, the state was forced to kick in $5 million in tax funds for roads connecting to the new airport, with another $5 million coming from local governments...
...While Stapleton traffic began picking up slowly in 1991 and increased an additional 9 percent last year, it is still operating at only half its capacity...
...Denver taxpayers will not be required to support its construction or operation...
...The idea of the public demanding a switch back to Stapleton is one that city officials seem to fear—they are allowing Continental to close up its maintenance facility and transfer 1,500 jobs out of state rather than to continue to let it operate by ferrying planes from Denver International to Stapleton...
...An Aviation Systems study warned that the "political focus" on building superfluous hubs was threatening to make "airport building the S&L scandal of the 1990s...
...As the Crow Flies Coloradans will pay most dearly for the airport—trip after trip, year after year—in the time and the money it will take to use it...
...Others have called it Federico's Folly...
...It noted that there is excess potential hub capacity already, including Kansas City, Dayton, and Atlanta, and that the big dollars are going to megaprojects like Denver's, while "small cities must literally beg to get an instrument landing system" budgeted to their airports...
...There was only a hint that Denverites might have to pay back that money through a surcharge on passengers, and Pella quickly squelched it...
...Michael Fumento covers national issues for Investor's Business Daily and is author of The Myth of Heterosexual AIDS, republished this fall in an updated paperback edition by Regnery Gateway...
...for someone taking a cab it has increased 40 percent...
...For the vacationer who parks, the airport has increased the cost of his trip by 18 percent over the original ticket price...
...Presumably they would do the latter, and extract even greater concessions from the airport at an even greater cost...
...Critics have contended that this runway could have been made longer, but that Pena, having already decided to go with the new airport, prevented it...
...The Grand Prix was a flop...
...Although the distance between the new airport runways is still greater than that between Stapleton's, this system would also have helped smooth out operations at Stapleton...
...The $3 doesn't count against the maximum of $20 per passenger allowed in the contracts with United and Continental, and makes Denver International even less competitive...
...Pella said Stapleton was "an embarrassing bottleneck, both in our national transportation system and our ability to have an efficiently run airport to build a strong, stable economy...
...In his speech nominating Pena, Clinton said, "His legacy includes the new Denver International Airport, which I believe will be the largest in this country by a good ways...
...Indeed, the cut-rate Southwest Airlines, which specializes in relatively short hops, has said it will not use the new airport because the per-passenger costs are too high...
...It has been widely suggested that Clinton—having met environmentalist resistance to appointing Hispanic Rep...
...And the claim of second-largest was never much more than an ego stroke...
...Today we do not contemplate it...
...If it doesn't, it won't be able to pay off its bond obligations...
...By 1990, usage of Stapleton had dropped about 20 percent below its high point...
...About 55 percent of Stapleton's passengers are classified as connecting, and to connecting passengers one airport is usually as good as another...
...The city has since lowered its expectations to $75 million for Stapleton, and Denver officials are saying it would probably take millions of dollars of infrastructure investment and inducements to attract users...
...It is not based on passenger capacity or flights handled, but on acreage, as the airport's few structures and runways are surrounded by a vast expanse of land for which the city paid dearly...
...Pena needn't have been a physics expert to know that such a huge force once set in motion would be virtually unstoppable, no matter what the consequences...
...They do point out that many of the new gates are wider than those at Stapleton, giving them great flexibility...
...He said, "We see business loss for every dollar that fares increase...
...Alas, the city's official figure is now $2.7 billion with no gold plate in the terminal to show for it...
...Still billed as the second-largest airport in the world, in fact it had become the second-largest in Denver...
...Denverites who try to save cab fare will face another unpleasant surprise...
...The local papers celebrated his coup in getting the whole country to pay for Denver's airport...
...In commentaries printed in both local newspapers he wrote, "The airport is user-funded...
...Both Pena and President Clinton cited Pefia's efforts—as mayor of Denver from 1983 to 1991—to build the airport as a factor in Pefia's appointment to the Department of Transportation...
...out of calculations...
...Roy Romer in 1988 when he threatened to "roll over" and "crush" any attempt to let the people decide on the project...
...While Pena promised to make Denver great, the city finds itself merely a great debtor, its jewels sewn into a massive tent-like structure on the windswept plains east of the city...
...C ertainly Pena can't take all the credit for the airport...
...In February 1991, the FAA released new traffic projections for the new airport, saying that by 2000 it would be the nation's fifth-busiest, rather than the second-busiest, with 44 million passengers a year rather than the 72 million it had earlier predicted...
...By contrast, Stapleton is 5.5 miles from downtown...
...Nevertheless, there are those, such as Aviation Systems' Boyd, who argues that Peria's ability to sell a dog like Denver International is what made him such an ideal choice for the Clinton administration...
...Pella refused, saying it was "not required and would serve no point...
...Yet Stapleton was in the process of expanding...
...It now stands at 88, twenty fewer than Stapleton has...
...MDC contributed big amounts to the 1987 mayoral campaigns of both Pena and his Republican opponent...
...When airport officials negotiated gate leases with American Airlines, they insisted on upping the $20 threshold to $25...
...Meanwhile, starting in January, the city will be paying $500,000 a day in interest on outstanding bonds on the airport...
...city is cleaner: requirements of the 1970 Clean Air Act dramatically reduced automobile emissions...
...But while violation days for Denver did drop from 125 in 1972 to three by the time Pena left office, they had already steadily declined to 31 the year before he was elected...
...71...
...As the alliance forged by thebroad coalition of airport supporters continues its work on advancing Denver into the future, there is no end to what we can accomplish, or how high we can fly...
...At current Denver cab rates—$1.20 to $1.40 a mile the fare to the airport will be $68 to $79 per round trip, including a 15 percent tip...
...Denver International is farther away from virtually everybody...
...Part of Peria's free lunch scheme was to wrest a $501-million commitment from the federal government in 1990...
...Fortuity also marked Pella' s administration...
...He initially said it was because the money should be devoted to a new airport...
...He lost...
...But the FAA didn't realize that the sudden burst in airline ridership was essentially a one-time explosion, and it failed to look at the trends in airport hubbing...
...Denver International will open with five jet runways, compared to the six at Stapleton...
...But influential state politicians threatened to start a petition drive and city council members threatened to block the project if no referendum were held, and Pena and Romer backed down...
...To resolve the problem, the airport will use "quick-scan" radar to efficiently keep track of flights...
...When Pella was picked to be the "cluster coordinator" for transportation issues during the transition period, a statement from the transition team declared that Pena had been involved in many projects to improve Denver's infrastructure, "including the construction of Denver International Airport, the world's largest [sic], to be finished in 1993...
...A study commissioned by a local group opposing the airport also reported that, "The remote location of DIA will result each year in approximately 800 million more automobile miles driven, six to 10 more lives lost in traffic accidentsand tons of exhaust fumes added to Denver's brown cloud...
...It turned out those figures included only design, construction, and construction management...
...Pena shouldn't have said that Denver taxpayers wouldn't pay for the airport, but rather that they wouldn't pay for it through the tax system...
...At about the same time, citing the Persian Gulf War and the ailing airline industry, Pena scaled back the new airport from 94 gates to 85...
...When Thomas Henry Huxley wrote that in On Medical Education, presumably he meant that mistakes were a learning experience...
...Long before the first shovel of dirt was dug at the new airport site, it was becoming clear that the superhub concept was in danger...
...The main cause of the delays Stapleton does have is that, during winter bad weather, airport officials will sometimes shut down one runway for fear of interfering with planes on another nearby runway...
...The magic number is $20, since the new airport's contracts with both United and Continental allow them to terminate or renegotiate at that point...
...All it did was create ruts, which then froze into place...
...Chief among those critics is Rocky Mountain News columnist Gene Amole, who has inveighed incessantly (some say obsessively) against the new airport...
...The referendum stated that the price of the airport would be $1.7 billion...
...The Greater Denver Corporation also got a direct piece of the action when the city, without going through the bidding process, gave it $325,000 to promote the airport...
...That compares to $4.00 currently for satellite parking at Stapleton...
...Aside from affecting airlines' abilities to terminate or renegotiate their contracts, the higher fees could encourage passengers to route their trips through other cities, leading to a "death spiral": higher fees resulting in fewer passengers resulting in higher fees, and so on...
...True, his parents made their living from cotton—but not picking it, brokering it...
...In its need to raise about three times as much money for operational costs as Stapleton needs, the city will probably be charging $10 a day with no cheaper rates for satellite parking...
...Stapleton is six times the size of Denver's entire downtown...
...Stapleton's traffic reached a record-high 34.7 million passengers, and the FAA predicted a steady increase in Denver traffic to 72 million by the end of the century, with Denver becoming the nation's second-busiest airport...
...Although he benefits politically from his Hispanic surname, he is far from being of humble birth...
...Said Boyd, "It was built on promises that were never kept, and statistics that were totally inaccurate, and it will cost an enormous amount of money...
...Commented Amole in a 1989 column, "The way the whole thing is shaking out is that big government, big business, big labor, big developers and the big media are one side, and the little guys who actually live in this town are on the other...
...Flight Delay Fibbery Peria's airport plan began in 1985, when after months of secret discussions he announced that instead of expanding Stapleton International, the current airport, the city would build a new one...
...Denver's air is cleaner for the same reason the air above every major U.S...
...For two years it tied downtown traffic in knots, for which Denver had the privilege of handing over $2.5 million in tax revenues to the promoter...
...Now they are going to put a park there," he says...
...As for US West, it has already netted a $24 million dollar fiber-optics wiring contract from the airport, and there could be plenty more where that came from...
...Aviation Director George Doughty scoffed at the projections, saying the only way it would cost that much was "if you gold-plate the terminal building...
...First, flight delays, especially in bad weather, were allegedly becoming intolerable at Stapleton, costing it business as a hub...
...Moreover, Washingtonians have the option of using close-in National Airport, three miles from downtown, and many of them do use it rather than trekking out to Dulles...
...Instead of looking at the actual data, however, the city cited a five-year-old 1984 FAA projection...
...Second, Federal Aviation Administration (FAA) projections indicated that if passenger use of Stapleton continued to escalate as it had in the first part of the 1980s, and if Stapleton didn't expand, then early in the twenty-first century the airport would no longer be able to handle the traffic...
...Late in 1989, by which time it was becoming clear that what Denverites had voted for and what they were going to get were two different animals, some began to demand a second vote...
...Sweetheart deal or no, Denver's power usage is estimated to increase by a third from 1991 to 1994, almost exclusively due to the new airport...
...But shortly after the vote, an investigation by a Rocky Mountain News reporter showed that the city had actually hidden $281 million in construction costs for an automated baggage system, and that the city knew about this before the vote but simply left it off the claimed price tag...
...But according to Aviation Systems Research Corporation figures, with emplanement figures going up an estimated $9.50 per person, at 15 million passengers in 1994 the increased cost to save that $120 million will be $142.5 million...
...It's a possibility but I don't want to speculate on hypothetical circumstances," he said...
...As their ability to make such heavy political contributions indicates, the Colorado legislature allows both utilities to use their monopoly status to reap exceptionally large profits, and both saw the new airport as a cash cow...
...I believe that's the reason for [my] being asked to do this...
...But in the world of politics, having already risen to his Peter Principle level of incompetence in a medium-sized city, he found himself yanked right up near the top leadership post in the nation...
...This despite Pella's earlier claim that the roads to the airport would already be paid for...
...This type of radar, though relatively new, was already in use when the building of Denver International began...
...The Texas-born Pella, 46, has always had a knack for taking advantage of a situation...
Vol. 26 • December 1993 • No. 12
