The Arizona-based Goldwater Institute has sued the city of Columbia to terminate an agreement with American Airlines providing a revenue guarantee to reduce their risk after adding new flights to Charlotte.
The $1.5 million guarantee between the city and American Airlines comes from both public funds and private donations, each adding $750,000 to the total. The public funds are taken from the city’s transportation sales tax.
According to the agreement, the fund would only be used if American Airlines does not make $1.5 million in private revenue over the year of air service through May 22, 2027.
The Columbia City Council passed the agreement in March as part of the contract with American Airlines to add a minimum of one round-trip flight per day between Columbia and Charlotte. The flights began May 21.
The lawsuit, filed Wednesday, argues that using public funds for this guarantee violates the Missouri Constitution’s “Gift Clause.”
According to a statement from the Goldwater Institute on Wednesday after the petition was filed, “local governments cannot provide public money to aid a corporation.”
“Missouri’s Gift Clause expressly bans cities and other state subdivisions from lending their credit or granting public money to or in aid of any corporation,” according to the statement.
“Simply put, Columbia taxpayers shouldn’t have to shoulder the business risk of a multi-billion-dollar company like American.”
Plaintiffs listed in the lawsuit are Mark Winter and Richard Shanker, both identified as taxpayers and residents of Columbia. In addition to the city, the Goldwater Institute is also suing Matthew Lue, the city’s director of finance.
The plaintiffs are asking for a declaratory judgment that the agreement is unconstitutional and therefore invalid, as well as an injunction barring the city from giving any public money to American Airlines or other commercial airline.
The city’s agreement with American Airlines follows similar revenue guarantees with airlines, including a $3 million fund in 2012–2013 that brought American to Columbia for flights to Chicago and Dallas.
In 2017, the city and United Airlines reached an agreement to guarantee $600,000 to the airline for flights to Denver.
