Conquering workforce requirements: Contributing to U.S. airport P3 success
These best practices can help private entities make their way through the labyrinth of workforce requirements for U.S. airport P3 programs
United States airport public-private partnerships (P3s) are developing in a different, uniquely-American way than the rest of the world. Airport transactions in the U.S. tend to be more “messy” with no standard to serve as a model for how airport P3s should be structured, and there is a limited track record of experience. State and local governments have their own rules and requirements regarding how the private sector must deliver concession infrastructure and services.
Governmental entities in the U.S. have long-established practices of requiring minority business enterprises (MBEs), disadvantaged business enterprises (DBEs), and local employment commitments as part of infrastructure development agreements with the private sector. P3 development projects often require tax-exempt bonds or tax increment financing (TIF) where the public sector seeks specific labor commitments from private developers in construction and operation in exchange for advantageous financing terms.
Airport P3 development is following down this same path—satisfying workforce requirements is a key factor (like stakeholder engagement) to the success of U.S. airport P3 concession. For example, the Denver Great Hall project, a long-term concession to redevelop the Jeppeson Terminal at Denver International Airport, required private concessionaire Ferrovial Airports to commit a specific percentage of MBE, DBE, and local employment.
As part of the two ongoing terminal redevelopment projects at John F. Kennedy International Airport (JetBlue, Vantage Airport Group, and RXR Realty for Terminal 6/7 and The Carlyle Group and Terminal One Group Association for Terminal 1), New York Gov. Andrew Cuomo is requiring that 30% MBE, DBE, and local hiring be employed as part of the terminal construction and operation. The pending Saint Louis Airport Lambert International Airport transaction is expected to have minimum requirements of similar scope.
Even P3 projects awarded by the same organization in the same year may have unique workforce commitments, such as:
|In April 2018, Los Angeles World Airports (LAWA) approved the LAX Integrated Express Solutions (LINXS) consortium to build the $4.9 billion Automated People Mover using the P3 model.||In October 2018, LAWA approved LA Gateway Partners as the P3 entity for the $2 billion Consolidated Rent-A-Car facility at the Los Angeles International Airport.|
|During construction, at least 30% of the workers will be local hires.||There must be at least 30% local hiring and applies to all contractors, lessees, licensees, and construction contractors.|
|Upon completion of construction, at least 60% of operational jobs are reserved for local workers.||The project requires ongoing training and development for the entire workforce throughout the 28-year contract.|
|LINXS will invest more than $1 million to ensure career pathways are created for traditionally underrepresented individuals.||It includes a fund to help veterans complete their 4-year degrees.|
|There will be 300 scholarships awarded to young Angelinos through local community organizations.|
The workforce requirement airport concessions challenge and solution
Increasingly, U.S. entities face challenges of crafting and implementing effective workforce development programs as part of airport concessions. American P3s must contend with complex workforce requirements that include: local hiring mandates; targeted employment of individuals with barriers to employment; creation of apprenticeships; and identifying and leveraging additional public, private, and philanthropic workforce resources.
In the course of our work on P3 projects, we have identified seven best practices that can help private sector developers and operators achieve success in navigating workforce requirements and commitments.
By collaborating with community organizations and training providers, U.S. airport P3 supporters can develop meaningful local hiring benchmarks that help ensure improved economic prosperity for local residents while creating a steady supply of skilled and motivated workers for contractors.
A workforce solution should address the diverse challenges facing both government and commercial entities—from program design, development, and financing to operations, and maintenance. An employer-driven, community-based, and outcomes-focused model will:
- galvanize support in the local community;
- strategically communicate the project’s value and benefits;
- remediate risk of delays or cancellations; and
- mobilize the workforce to design, build, and maintain the P3 project.
If a plan accounts for these factors and the seven best practices above, it stands the best chance of smooth, successful execution.
A parallel sector P3 case study: Port Covington in Baltimore, Maryland
ICF helped a large P3 developer craft the local workforce commitments for Port Covington, a $5.5 billion, 235-acre redevelopment project located on the City of Baltimore’s prime waterfront. As one of the largest urban revitalization efforts in the U.S., Port Covington is projected to generate 40,000-50,000 construction jobs and 20,000-30,000 post-construction follow-on jobs.
The developer’s goal was to access $660 million in TIF to offset the critically needed $1.4 billion infrastructure investment. They anticipated that the City of Baltimore would require a workforce strategy for the future community benefits agreement to unlock the TIF. In Baltimore, TIFs can take up to 10 years to navigate the legislative labyrinth and stakeholder engagement process. The developer pledged that the legislation and accompanying CBA would be introduced, negotiated, and finalized within nine months. To achieve the ambitious schedule, ICF created a data-driven, transparent P3 workforce strategy using our seven best practices—resulting in the following outcomes:
- The developer obtained $660 million in tax enhanced bonds within a highly aggressive timeline (nine months).
- The community received explicit employment guarantees.
- The lenders received a clear roadmap of how this project was going to be delivered.
- Baltimore City officials landed a high-profile project generating billions in economic improvement.