ABIA attempts ‘unusual’ use of eminent domain to force out South Terminal operator

Ask anyone stuck on an airplane waiting for a gate at Austin-Bergstrom International Airport if the Barbara Jordan Terminal is big enough, and you’ll hear something like this:

“It’s mind-boggling to me that Bergstrom has not grown as it’s needed to. It’s embarrassing,” said Jon Lamb, a Florida resident who last month was stuck on an American Airlines plane after landing because no gates were available. “I was angry that now I’m going to miss an important customer call.”

Officials who run the city-owned airport want to fix this problem by building more gates. A big plan in the works would add a new concourse by 2028 with at least 10 gates and the ability to expand to 40. The concourse would be connected to the Barbara Jordan Terminal by an underground pedestrian tunnel.

But there’s one big obstacle: The South Terminal where ultra-low-cost airlines Allegiant and Frontier operate would have to be demolished.

The South Terminal is run by a private company, Lonestar Airport Holdings. In 2015, the Austin City Council approved a 30-year lease with Lonestar’s parent company plus two optional five-year extensions.

Lonestar says it has invested close to $20 million in the South Terminal, including about $1 million to accommodate a $75 million Allegiant base of operations that opened in November.

So now the city of Austin is attempting a novel use of the state’s eminent domain law to terminate Lonestar’s lease. AUS wants the company gone by July 2023.

As part of the condemnation process – legal steps under eminent domain law to seize a property – the city sent an initial offer in late March to buy out Lonestar’s lease for nearly $2 million.

Lonestar rejected the offer as “objectively offensive.” In a blistering response, the company’s lawyers accused the city of trying to “wrongfully condemn its way out of binding contractual obligations.” They said the city’s attempts to force out Lonestar would fail in court.

Jacqueline Yaft, the airport’s executive director, signaled confidence that the eminent domain process would proceed as planned.

“The city’s next steps will be to send a final offer letter to the tenant as required by the Texas eminent domain statute,” she told commissioners overseeing the airport.

If that offer is rejected, the city would then file a condemnation lawsuit to force out Lonestar.

Attorneys who work in eminent domain law said this is far from an open-and-shut case.

“I think this is kind of an unusual one,” David Todd, an eminent domain attorney based in Austin, said. “We may even develop some new case law based on the result of what the result is here.”

“There is some precedent to say (the government) can’t use eminent domain simply to take over a business that it had already contracted to allow someone else to do,” Todd said.

Usually, eminent domain is used to seize property for a public use. In this case, the city is trying to terminate a lease on its own property.

“That’s a very atypical scenario,” said Luke Ellis, an eminent domain attorney who teaches at UT Austin. “Usually the condemning entity is not the owner.”

Ellis says even if the city can use eminent domain to force out the South Terminal operator, it may have unintended consequences.

“If the city could simply condemn its way out of any contract that they no longer believe is suitable or advantageous to the city, the net effect of that is private enterprise is going to have zero interest in doing any business with the city,” he said.

Airport officials have been reluctant to comment publicly on a case that could wind up in court. AUS issued a statement that reads in part: “The Department of Aviation will continue to work with all business stakeholders and tenants throughout the duration of this program and looks forward to delivering an improved passenger experience to all AUS customers.”

This story was produced as part of the Austin Monitor’s reporting partnership with KUT.

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Posted In: Transportation, District 2