N. Orleans Airport Eyes $200M GO Zone Deal

DALLAS - A proposed $5 per day surcharge for car rentals at Louis Armstrong New Orleans International Airport would support up to $200 million of Gulf Opportunity Zone bonds for construction of a four-story consolidated car rental facility at the airport.

The facility would include office and counter space for car rental companies, vehicle maintenance areas, and some 2,600 parking spaces for rental cars. It would be connected to the airport terminal by a moving sidewalk that would eliminate the need for shuttle buses.

If the bonds are approved, work on the facility could begin in May 2010 and be completed by spring 2012.

The New Orleans Aviation Board, which would issue the bonds, approved the project in late February. The New Orleans City Council's budget committee endorsed the financial plan last week, and the full council will be asked to approve the plan at its meeting on Thursday.

The aviation board will ask the Louisiana State Bond Commission on April 17 for an authorization of $200 million from the remaining $918 million of GO Zone bond capacity allocated for the New Orleans area.

Jarrell Godfrey of the Godfrey Firm PLC, the Aviation Board's bond counsel, estimated the airport would save more than $30 million by financing the project with tax-exempt GO Zone bonds rather than issuing taxable revenue bonds.

"The airport is prohibited from issuing tax-exempt bonds for a rental car facility," he said. "Historically, the interest rate on tax-exempt bonds is 2% lower than on taxable bonds. That isn't exactly the case right now because the market is confused. But we think that historical relationship will return."

The car rental facility is expected to cost $160 million to $175 million, Godfrey said, but the board will ask for an allocation of up to $200 million to cover any unexpected construction expenses and other costs.

The car rental surcharge could be imposed by the Aviation Board by summer, and is expected to generate $9.7 million in 2009. Annual revenues from the surcharge are predicted to increase to $12.7 million by 2020.

The airport currently does not levy a rental car surcharge, but it received $9.3 million in terminal lease revenue from the rental companies in 2006. That is approximately 17% of the airport's non-airline revenue.

Anthony J. Mumphrey Jr. of TMG Consulting said the new car rental facility would meet the airport's needs for the next 15 years. The four-story structure would triple the amount of rental car parking spaces, which currently total about 800.

Until airline traffic plummeted after Hurricane Katrina flooded much of the city in late August 2005, Mumphrey said, rental companies would often run out of available cars due to the limited space.

"Traffic is returning, and it is beginning to strain the car rental companies," he said. "The mix of travelers is changing. We're seeing more business travelers, and they tend to rent cars more often than do tourists."

Current passenger loads are approximately 80% of pre-Katrina levels.

Standard & Poor's rates the Aviation Board's passenger facility charge revenue bonds A-minus and its outstanding general revenue bonds BBB-minus. Fitch Ratings rates the PFC bonds A-minus.

The airport has $212 million of outstanding debt. Passenger facility charges support $88 million of the debt, with general airport revenues supporting $124 million.

The airport also has $35.4 million of outstanding GO Zone bonds. Congress in 2006 gave Louisiana the capacity to issue $7.9 billion of tax-exempt Gulf Opportunity Zone bonds to help rebuild the state's economy after hurricanes Katrina and Rita in 2005.

 

For reprint and licensing requests for this article, click here.
MORE FROM BOND BUYER