Bonds Fuel Expansion at Orlando, Tampa Airports

tampa-air-people-mover-357-credithcaal.jpg

BRADENTON, Fla. — Two of Florida's largest airport operators plan to spend billions on their first multi-year capital plans in years.

Both plans in Orlando and Tampa, driven in part by growing passenger demand, depend on millions in bond financing to go with local, state and federal funds.

The Greater Orlando Aviation Authority is initiating a $1.1 billion capital improvement plan through 2018, though longer-term programs call for $2.2 billion in spending and constructing a second terminal at Orlando International Airport.

Click here to see slide show.

OIA, owned by the city of Orlando, was the 13th busiest airport in the country in 2012, according to the Airports Council International-North America.

A $2.5 billion capital plan is underway at Tampa International Airport, about 92 miles from Orlando's airport.

The Hillsborough County Aviation Authority, an independent special district that operates TIA, in January approved the first phase of improvements estimated at $930 million. TIA was the U.S.'s 31st busiest airport in 2012.

While Orlando and Tampa serve different market, their capital plans have similarities, including construction of lengthy automated people movers, new consolidated rental car facilities, and longer range plans for additional facilities as passenger demand requires.

Florida is the only state in the country with four large hub airports, which include Orlando and Tampa as well as Fort Lauderdale-Hollywood and Miami International airports, according to the Florida Airports Council.

FAC Executive Director Bill Johnson lauded a recent announcement by Gov. Rick Scott to provide state funds for expansion and renovation projects at Orlando and Tampa.

"Airport development is a partnership among local, state, and federal governments, but increasing funding from the state and/or federal government partners allows each individual airport to maintain a lower fee structure for airlines and tenants," Johnson said in an email Tuesday.

Airlines are profit-driven and are attracted to airports with the most competitive fee structure, he said.

"We do compete with other sun-belt states and our objective is to assure that Florida's per-passenger costs are among the lowest in the country," he said.

GOAA will receive $213.5 million through the Florida Department of Transportation's budget over the next five years, which will be dedicated largely to facilities at Orlando International that cannot be constructed using Federal Aviation Administration funds, according to executive director Phil Brown.

Those projects include railroad-related structures that are part of the station for the people mover complex and an intermodal transit facility that will serve a privately funded passenger rail service from Orlando to Miami, as well as the local commuter rail system called SunRail.

Orlando will be the first airport in Florida to have an integrated rail system, officials said.

The planned capital projects will increase capacity at OIA to serve 45 million passengers a year. The airport, which opened in 1981, originally was designed to accommodate 24 million travelers annually.

The $1.1 billion capital plan runs through 2018, and is expected to be supported by $300.6 million of revenue bonds backed by passenger facility charges and $242.9 million of general aviation revenue bonds with the rest of the funding from state and federal sources.

"What drives the traffic in Orlando is the fact that we are a global destination," Brown said in an interview with The Bond Buyer.

In 2013, OIA saw 34.77 million arriving and departing passengers for a decrease of 1.4%. While the number of domestic passengers was down 2.1%, to 30.8 million, the number of international travelers was up 4.2% to 3.95 million.

While central Florida is known for its theme parks and of hotels - which have $5 billion in new projects under way - Orlando also has developed a cluster of medical research and health care services that also have billions worth of new projects in progress.

"There's going to be plenty of demand and we're going to need to provide the facilities to accommodate the growth in air traffic," said Brown, whose background in public finance included a four-year stint at Public Financial Management Inc., and 10-years at PaineWebber, which was later acquired by UBS AG.

"Right now the linchpin to the major portion of the CIP is the south airport automated people mover," he said.

The $470 million people mover will run 1.5 miles from the current north terminal to the planned south terminal where an intermodal transit station and parking facilities will be located on a 1,300-acre site.

Eventually, a second terminal will be built, though its schedule depends on OIA reaching 40 million annual passengers and two million arriving international passengers.

The overall CIP includes about $1 billion of improvements to existing facilities, including the baggage and claim system in the existing terminal, upgrades in the ticket lobby to accommodate changes in technology, security upgrades, and amenities.

The Greater Orlando Aviation Authority has access to two lines of credit totaling $250 million that it plans to use for interim financing, which eventually will be taken out with bond proceeds, according to Brown.

"I expect we'll be doing some financing later this year," he said, adding that such a deal could be about $150 million of bonds backed by passenger facility charges. "There's potential for doing another financing [this year] but we've got to get cost details yet for the parking structure."

GOAA had $1.15 billion of outstanding revenue bonds as of Sept. 30, 2012. Of that, $999 million are senior revenue bonds rated AA-minus by Fitch Ratings, Aa3 by Moody's Investors Service, and A-plus by Standard & Poor's. All three rating agencies have stable outlooks on the debt.

At Tampa International Airport, on the state's west coast, the state plans to provide $194 million in funds over the next five years toward its $2.5 billion master plan.

TIA, an origination-destination facility largely serving surrounding counties, is undergoing its first major renovation and expansion in more than four decades.

In calendar year 2013, TIA saw 16.92 million passengers, which was an increase of 0.59% from 2012. By 2023, the passenger load is projected to increase to 20.8 million.

The Hillsborough County Aviation Authority approved $935 million to implement the first phase of the master plan, which includes a $318.7 million, 2.3 million-square-foot consolidated rental car facility connected to the main terminal by a $417.5 million, 1.3-mile automated people mover.

Other projects in the first phase include taxi reconstruction, roadway improvements, main terminal and concession redevelopment, and warehouse and kitchen renovations.

Airport officials call it the "decongestion" phase because it will provide connections to regional transportation systems and free up space in the long-term parking garage and the main terminal by moving rental car operations farther from the terminal.

"These initial projects will help us decongest roadways and curbsides, allow rental car companies to grow, and begin to set the stage for the doubling of passenger capacity projected over the next couple of decades," TIA Chief Executive Officer Joe Lopano said in January.

A $452 million second phase will expand the main terminal as passenger demand dictates, replace a hotel, relocate the air traffic control tower, and add employee parking. A third phase likely to be developed between 2020 and 2028 calls for a $1.2 billion expansion of the main terminal to handle 34.7 million passengers annually, and includes creating a new airside with international and domestic gates, upgrading security checkpoints, and adding concessions.

"The beauty of this plan is that it takes a measured approach to capital investment so we can expand incrementally as passenger demand dictates," Lopano said when the master plan update was approved. "It also takes advantage of the airport's ground-breaking original design that offers plug-and-play expansion by building a new airside attached to the main terminal."

To support the program, Tampa started work on its plan of finance in October with a $169 million refunding designed to create a new subordinate lien structure for future financings, according to documents prepared by Public Financial Management Inc., TIA's financial advisor.

The subordinate bonds were rated A by Fitch and S&P, and A2 by Moody's. Raters also affirmed their A-plus and A1 ratings on TIA's senior bonds.

The first phase of Tampa's plan could require more than $600 million of bond financing, though the final amount depends on how much of the plan is offset by state and federal funds.

The Aviation Authority had $541.16 million of revenue bonds outstanding at Sept. 30.

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