DALLAS - Denver is preparing up to $250 million of bonds, mainly to pay for short-term improvements while sketching plans for a major redevelopment of its landmark terminal building over the next five years.
The city also may sell bonds to refinance outstanding airport debt currently subject to the alternative minimum tax.
The bonds won approval last week from the City Council's Economic Development Committee. Proceeds will go toward upgrades of the terminal and ground transportation systems, including the automated train that connects Denver International Airport's three concourses.
The council committee also approved a seven-year contract with engineering firm Parsons Transportation Group to oversee redevelopment of the main terminal, construction of a long-awaited Westin hotel, and preparation of a station and infrastructure for a FasTracks commuter rail line scheduled to arrive in 2015.
"None of this has been designed," said DIA spokesman Chuck Cannon. "It's a few years away."
The redevelopment is triggered by the FasTracks line that will connect DIA to downtown Denver's Union Station rail terminal. As part of the plan to build the DIA rail station, the airport also wants to finally build its first airport hotel, which has been talked about since DIA's opening in 1995 and delayed repeatedly by economic turmoil.
Kim Day, an architect and Denver's director of aviation, would like to hold ground breaking for the hotel in February, which would be the second after construction was aborted several years ago.
DIA's main Jeppeson Terminal, known for its white tent top, would undergo some major changes as part of the redevelopment, including closing the "Great Hall" to anyone who did not have an airline ticket or a job at the airport.
The proposal is causing anxiety among vendors who fear they would lose business. The main terminal has shops and restaurants on two levels and provides a meeting place for people bringing or meeting passengers. The three concourses, connected to the terminal by the automated train are open only to ticketed passengers who have cleared security in the Great Hall.
Meanwhile, the upcoming bond issue, which requires approval by the full City Council, would include airport system revenue bonds, Series 2009A-B. The new bonds will be fixed rate, and the city is considering issuing Build America Bonds as part of the mix.
Series A will be issued as tax-exempt, fixed-rate debt with an approximate par amount for new-money financing of $175 million. Another $75 million could be issued for debt refunding purposes depending on the market.
New-money proceeds will cover the terminal complex, security, technologies, baggage system, ground transportation improvements and other upgrades.
Denver may also refinance $250 million of outstanding airport private-activity bonds. The city expects interest cost savings by eliminating the federal alternative minimum tax provisions on the outstanding bonds. The American Recovery and Reinvestment Act's AMT holiday expires in December 2010.
If undertaken, the refunding involves soliciting existing private-activity bondholders to tender their bonds at a certain price and issuing new bonds at a lower interest rate that would not be subject to AMT penalties.
"The success of the tender process is unknown and the par amount of refunding bonds issued will be dependent upon the amount of bonds tendered by investors," finance officials told the council committee in a written report.
The city is considering bond insurance on the Series 2009A-B bonds to enhance its ratings of A-plus from Standard & Poor's and Fitch Ratings and A1 from Moody's Investors Service.