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Austin ordered to pay South Terminal operator $90 million in eminent domain fight at ABIA

An Allegiant Air airplane at the South Terminal of Austin-Bergstrom International Airport
Gabriel C. Pérez
/
KUT
An Allegiant airplane parks at ABIA's South Terminal, which is operated by Lonestar Airport Holdings. The city is trying to seize the South Terminal through eminent domain in order to expand the airport.

The City of Austin should pay $90 million to evict the company running the South Terminal at Austin-Bergstrom International Airport, a panel of special commissioners ordered in Travis County Probate Court.

The amount awarded by the special commissioners — three landowners with no stake in the deal who were appointed by a judge — is 46 times what the city had originally offered Lonestar Airport Holdings.

"It's a pretty extraordinary result," said David Todd, an eminent domain attorney in Austin.

Google Earth animation flying over the Barbara Jordan Terminal to show where the South Terminal is in relation.
Google Earth
The South Terminal is just beyond the Barbara Jordan Terminal and in the path of the city's airport expansion plans.

The South Terminal — where discount airlines Allegiant and Frontier operate — is a much smaller facility than the main Barbara Jordan Terminal at ABIA. The South Terminal has three gates, food trucks, and indoor and outdoor waiting areas.

Lonestar Airport Holdings was granted a minimum 30-year lease of the South Terminal in 2016. The deal allows for two optional five-year extensions. Lonestar claims to have invested almost $20 million since taking over the terminal.

People dining outside under a white tent at the South Terminal. Blue and turquoise tables and chairs are set up. In the foreground are pink flowers.
Gabriel C. Pérez
/
KUT
An outdoor patio and food truck dining area at the South Terminal.

Austin airport officials, with the blessing of the City Council, want to demolish the South Terminal to create space for a new concourse with at least 10 gates. The concourse would be connected to the Barbara Jordan Terminal by an underground pedestrian tunnel.

An illustration showing the airport's expansion plans
City of Austin Department of Aviation
Airport officials want to replace the South Terminal with a new concourse linked to the Barbara Jordan Terminal by underground walkway.

In a statement, the city didn't say whether it would pay the $90 million or object to the valuation. Either side can dispute the award in civil court.

The $90 million decision "furthers the airport's mission to deliver critical improvements and modernization projects needed to support increased passenger and airline activity," the airport said in a statement. ABIA said it would not make anyone available for an interview or answer further questions.

People lined up to go through TSA screening in the Barbara Jordan Terminal.
Patricia Lim
/
KUT
City officials say the Barbara Jordan Terminal is running over capacity. They argue the South Terminal needs to be demolished to make way for a new concourse that would start with at least 10 gates and be able to hold as many as 40.

Lonestar Airport Holdings CEO Jeff Pearse said in a statement that he’s pleased with the $90 million award and wants to reach an “amicable” deal with the city to “avoid ongoing, costly and unnecessary litigation.”

Eminent domain attorney Luke Ellis, who also teaches at the University of Texas Law School, said the use of eminent domain by a government authority to terminate a contract is "very unusual."

"It's essentially akin to the city trying to condemn its way out of obligations and agreements. I think that's terrible," Ellis said. "If the city were to prevail here, I think it would discourage and dissuade future private businesses from partnering with the city."

The city is already moving to bulldoze every building around the South Terminal. Demolition companies were invited in December to bid on an estimated $6.5 million contract to destroy 39 buildings. Six companies have bid.

A drawing showing some of the buildings near the South Terminal that the city wants demolished.
City of Austin
Part of a city drawing inviting companies to bid on bulldozing structures around the South Terminal. The buildings shaded in color are slated for demolition.

Meanwhile, a separate case is playing out in federal court.

Lonestar Airport Holdings sued the city, alleging a provision of its lease allows the company the exclusive first right to be involved in any airport expansion.

In federal court filings, Lonestar says it was willing to make a "significant up-front investment" in the South Terminal only because the length of the lease would give the company a chance to recoup its investment.

Attorneys for the city countered in federal court filings that Lonestar's lease allowed the company to be involved in the airport expansion only if the city agreed.

U.S. District Judge Robert Pitman last month denied Lonestar's request for a temporary halt to the airport expansion while the lawsuit proceeds.

Pitman ruled Lonestar would not suffer irreparable harm, because "monetary damages could remedy Lonestar's alleged injury."

Lonestar claimed in court filings it would prove the city directly cost the company hundreds of millions of dollars.

Correction: A previous version of this story incorrectly stated Lonestar claims to have invested almost $50 million in the South Terminal. The figure is nearly $20 million.

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Nathan Bernier is the transportation reporter at KUT. He covers the big projects that are reshaping how we get around Austin, like the I-35 overhaul, the airport's rapid growth and the multibillion dollar transit expansion Project Connect. He also focuses on the daily changes that affect how we walk, bike and drive around the city. Got a tip? Email him at nbernier@kut.org. Follow him on Twitter @KUTnathan.
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