Columbia City Council’s $1.5 million revenue guarantee for American Airlines – which includes $750,000 in taxpayer money – is unconstitutional, according to the Goldwater Institute.
Last month, the council approved the revenue guarantee that allowed the city manager to execute an air service agreement to provide roundtrip services between Columbia Regional Airport and Charlotte Douglas International Airport.
Under the agreement, American Airlines promises to provide nonstop flights at least once a day, and the city guarantees the $1.5 million for one year. Half of the money is from the Transportation Sales Tax, and the other half is private contributions. The flights are scheduled to start next week.
But the Goldwater Institute says the revenue guarantee violates the Missouri Constitution’s Gift Clause.
“Taxpayers should never be on the hook just because a major airline’s new route to their city fails to turn a profit,” Goldwater Institute Senior Attorney Tony Napolitano said in a May 13 post. “But a deal that city leaders in Columbia, agreed to with American Airlines promises to do exactly that.
“Now, the Goldwater Institute is demanding the city update its arrangement so taxpayers are no longer responsible for shoring up American’s bottom line.”
The institute sent a letter to Columbia city officials May 13 as well.
“The agreement exposes the city’s taxpayers to a risk of significant financial loss, without any prospect of recovering a share of the profits that AA may reap from operating this daily route,” the letter addressed to Mayor Barbara Buffaloe states. “The mere promise to insure AA against potential financial losses it might realize from operating a daily route between Columbia and Charlotte effectively lends the city’s credit to AA, allowing AA to take financial risks it otherwise might deem unwise because the city has promised that taxpayers will absorb any resulting financial losses.
“Any direct outlay of public funds to AA under the agreement would also violate the Gift Clause.”
The Gift Clause prohibits municipalities from gifting public money or credit to private organizations. Specifically, it does not allow a local government to “lend its credit or grant public money or thing of value to or in aid of any corporation, association or individual.”
“Public tax dollars should be spent on essential public services, not corporate welfare—in Missouri, it’s the law. But for some reason, Columbia city leaders are offering taxpayer money to guarantee the profits of American Airlines,” Napolitano said. “This arrangement is an abuse of power and a clear violation of the Missouri Constitution’s Gift Clause.
“Columbia leaders must act now to ensure taxpayers aren’t subsidizing a multi-billion-dollar company’s bottom line.”
To comply with the Gift Clause, the Goldwater Institute urges Columbia leaders to take steps to ensure that only private money is used to pay any invoices American Airlines submits under the agreement.
“The clock is ticking in Missouri,” Napolitano wrote. “By June, American Airlines’ taxpayer-subsidized flights will be off the ground in Columbia. The Goldwater Institute will continue demanding transparency and making sure Columbia officials follow the Missouri Constitution.
“Taxpayers shouldn’t be forced to pick up the tab for a private airline’s potential lackluster ticket sales. The public’s money belongs to the public, not to a private corporation’s bottom line.”
