Detroit Airport Agency OKs $3.6B Plan; Delays Runway, Monorail

CHICAGO - The board of the Wayne County Airport Authority recently approved a $3.6 billion master plan for the Detroit Metropolitan Wayne County Airport that postpones plans to build a fifth runway and a passenger monorail line.

The seven-member board unanimously approved the plan after twice delaying earlier votes. A group of suburban opponents had said the plan overestimated future demand at the airport. Airport officials have spent the last several weeks negotiating with suburban officials and U.S. Rep. John Dingell, who helped broker the compromise.

The new agreement comes as the airport prepares to open its new $431 million terminal on Sept. 17. Meanwhile, airport officials plan to enter the market in early September for the third time since April. The new bond issue will refund the last piece of the airport's insured variable-rate debt. Earlier refundings refinanced all its auction-rate debt.

The new capital plan includes a "future" and an "ultimate" phase, where certain projects will be accomplished before 2016 and others after that. Under the new plan the airport will likely shelve the plan to build a fifth parallel runway as well as an internal monorail line that airlines largely opposed. Airport officials can still move forward if they demonstrate demand is there, said Tom Naughton, the airport's chief financial officer.

"The near-term stuff is airfield improvements, consolidated car rental facilities, and the runway and the [monorail] would now be part of the ultimate plan," Naughton said. "If we had to we could accelerate it, but we'd have to make the case to the airlines [for the monorail]. We'd have to demonstrate the demand is there, together with other sources of funding."

The internal monorail line is estimated to cost $734 million, some of which would be financed with passenger facility charges. The project could attract additional funding sources if the rail line linked outside the airport to a proposed commuter rail line between Ann Arbor and Detroit, Naughton added.

Of the current $3.6 billion master plan, about $2 billion to $2.5 billion would be raised through the sale of general airport revenue bonds, Naughton said. Another $500 million would come from federal grants. Revenue from the new consolidated car rental facility would bring in another $240 million, he said.

If Congress approves an increase in the passenger facility fees - which are currently $4.50 per passenger - then that could possibly finance additional general airport revenue bonds that would be paid off with passenger facility charges, he said.

Both plans will go to the FAA but only the "future" plan will be reviewed, according to reports.

In early September the authority plans to enter the market with about $80 million in variable-rate demand bonds that will be used to refund outstanding variable-rate debt that is insured with Ambac Assurance Corp. The bonds will be enhanced with a letter of credit from JPMorgan Chase & Co. Since April and including the upcoming deal, the airport will have refinanced about $555 million in auction-rate and insured variable-rate debt.

"The sad thing about this whole world is that you have to refund the bonds to get rid of the insurance company," said Terry Teifer, the airport's vice president of treasury. "It's too bad you can't just tell the insurance company 'you're terminated.' And you pay up front for those guys."

"We're hoping the whole credit situation gets better because standby bond purchase agreements, they were pretty cheap" compared to letters of credit, which the agency now needs on its deals, he said.

Under the terms of the letters of credit the airport is allowed to terminate the agreement without a fee, according to Teifer. "You'd be a fool not to learn from the past," he said. "I'm sure if insurance ever comes back, then we'll be looking for the same thing from them."

Both Fitch Ratings and Standard & Poor's have A underlying ratings with stable outlooks on the airport. The airport has a total of about $2 billion of senior-lien debt and another $214 million of junior-lien debt outstanding.

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