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1/8/2019 - Umbaugh and Associates presents Airport Funding Plan to City Council
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John Julien from Umbaugh and Associates discussed the funding plan for the airport expansion project during the city council meeting. He stated that the first step would be to prepare an ordinance to be presented to the council in February to approve the funding plan. He reported that the project includes two phases: acquiring land and construction of the runway extension. The project would have one financing package which he described as a "line of credit" but would be technically defined as a bond issue by state statute. Under this type of funding, the airport authority would draw down funds as needed to take care of costs as they are incurred instead of borrowing all of the approximately $10-11 million up front. He pointed out that this funding plan is unique because most (about 95 percent) will come from Federal and State grants. The projected local cost would be paid through $500,000 in city EDIT funds and net operating revenue of the airport which would retire the debt in 5-7 years. By statute, the security pledge is limited to airport revenues. The banks that are in discussions for the project are said to understand the nature of the project and the security of the debt is heavily dependent on receipt of grant dollars.
Mr. Julien stated that the $500,000 in EDIT funds along with airport revenue should cover the final cost of the project after expected grants. He recommended an initial "line of credit" of about $3.5 million until the grants are better defined. The land acquisition costs are expected to be in a range from $1.8 million to $2.5 million. In a separate conversation with a member of the airport board, it will take 3-4 years to get reimbursement for the land acquisition and interest on the funds borrowed would be paid by airport revenue.
Mr. Julien said that the risk with the "line of credit" is that the land is acquired and the grants don't come in. The security for the land is the net operating revenue of the airport which would not be enough to retire the debt. If the grants don't occur, the options would be to sell the land or use other city funds to retire the debt. He simplified it as: Plan A - grants come in and Plan B - liquidate land if grants are not provided.
Mr. Julien then reviewed the steps as follows (assuming the council approves the ordinance): the ordinance is adopted with no public hearing necessary; rules could be suspended and the ordinance could be approved on the first reading; ask banks to submit formal proposals for lending terms; select the bank with the best financial package. If rules are suspended and the ordinance is passed on the first reading, the "line of credit" could close in early February or, if a second reading is required, early March.
Paul Shaffer from BF&S then stated that airport improvement grants are paid through the Federal Aviation Administration's Trust Fund. The payback on grants received is based on yearly Congresssional appropriation. The grant process requires the submission of a Capital Improvement Plan. The airport authority then applies for grants each year that are reviewed by the FAA and granted based on available funds.
Upon completion of the briefing, the council approved having an ordinance developed and submitted for consideration during the February meeting.
Tom Flemming-WTRE News
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