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Airport project financing built on field of dreams

To the Editor:

You probably remember the “Field of Dreams” movie. A young corn farmer builds a ball field. Long-dead ball players from the 1919 Black Sox scandal show up. In the final scene, a long stream of cars is seen headed for the field for the dream game. To make the plot work, the main point of tension is how will the farmer be able to meet his financial obligations with the Field of Dreams in his backyard, complete with an imaginary crowd of fans?

I see the same kind of tension unfolding at T.F. Green Airport. In this real-life story, starry-eyed Rhode Island Airport Corporation (RIAC) executives come into town with visions of building international jetports in the heart of Warwick. To support their dreams, they propose that long-dead airplanes are going to show up to take us all to distant lands. Then, in their dreams, long streams of cars roll in from the Boston area to fill these planes. We are promised non-stop service to our dream destinations without taking the 45-minute trip to Boston’s Logan Airport and all its “HUB bub.”

Like the farmer, our RIAC executives are hard-pressed to explain to the public just how they will pay for these dreams. They meet month after month in their private clubroom – oops ... boardroom – trying to imagine where the money will come from. The reason for their privacy? To protect the public from advance knowledge of how they hope to actualize their dreams. 

RIAC’s financing dynamics are increasingly problematic. Their executives have had to turn to the Clean Water Financing Agency to borrow $32 million to build a proposed glycol-processing plant. The way Clean Water Financing works puts Warwick’s sewer ratepayers at risk of substantial rate increases in the event that the RIAC executives’ dreams melt away. This means that Clean Water Financing effectively becomes a banker to RIAC, charged with the responsibility of making sure that all future RIAC loans make sense and are honored. The Clean Water chairman is the former finance director of the city of Warwick, an airport neighbor, and an executive at a local bank. It is now his responsibility to bring future RIAC financing deals out of the private clubhouse through Clean Water Financing oversight.

When RIAC officials met recently with the Clean Water Financing Board, the RIAC chief financial officer stated that the reason RIAC’s future borrowing plans for relocation of ball fields, realigning Main Avenue, and extending the runway had been previously undisclosed to Clean Water is because the financing bonds for these new programs will be paid with Passenger Facility Charges (PFCs). They are not included in the RIAC Capital Budget for this strange reason. The implication was that these PFCs were some kind of secret gold that nobody needs to know about. That secret is out now, and full public disclosure of all PFC activities is an FAA mandate.   

For RIAC to look to Congress for future assistance would likely be unproductive, because members of the House of Representatives have taken millions in “Airport Improvement Funds” to fill gaping holes in the air traffic controllers’ accounts to keep planes flying. Now airport executives are pushing to fill that new gap with additional PFCs. Airlines and small-government conservatives are waving red flags. The chant is “no increase in PFCs.”

Future borrowing at RIAC hinges on PFCs. The loan for the future glycol plant totally precludes other types of borrowing. Only PFC-based loans will work. RIAC’s debt service is now approaching $30 million per year against $44 million per year in revenues, including PFCs committed to existing loans. That leaves about $3 million in PFCs per year to pay for new loans. Fitch Ratings, an agency specializing in airports, has an official policy that loans based on PFCs will be rated “A” at best and “BBB” for more strained airports. RIAC has been warned by ratings agencies that future borrowings will probably lead to ratings downgrades. “BBB” is the bottom of the investment-grade scale. RIAC’s Interlink train station has already reached the bottom of this scale.  

Since RIAC has been using some of this $3 million per year in PFCs for such things as deicing equipment at Quonset State Airport and other current needs, committing this flexible PFC revenue stream to long-term bonds begs the question of how current needs will be funded. The bigger problem is what will happen if airlines continue to pull flights out of Green, or increase the use of smaller regional jets. Passenger counts drop, PFCs dry up, and RIAC could easily go into violation of its bond-covenant agreements with its bondholders and the city of Warwick through Clean Water Financing.

That’s why it will be ever so difficult for RIAC executives to build their “Field of Dreams,” which, ironically, would replace Warwick’s existing ball fields with a runway to nowhere. The coffers are all but empty. What’s coming next? RIAC must have a frank discussion with Warwick city officials on how the airport will protect the Sewer Authority customers from PFC-based loan risks. At least, that’s the way things should work.

Richard Langseth

Executive Director

Greenwich Bay

Watershed Group 


Comments
12 comments on this item

I give you credit you don't let up. You will always be against the airport and the expansion. So keep writing your propaganda.

This entire article is about the glycol plant. You are obsessed with it.

Actually this letter is about RIAC's seemingly endless desire to borrow to the max. Since the glycol loan isa "parity loan" it places Clean Water at parity with EDC thus requiring RIAC to notify Clean Water of new loan events.

RIAC will no longer have PFCs to maintain the other airports under its control if the runway extension moves forward. This puts Block Island, Westerly and Newport in danger of closing. That is why the new RIAC president wants to dump these other airports.

Michael, stop the charade and tell people who you are...You are a Sapatoni, a family member, (Son and Grandson) of the powerful leaders within the Laborers International, Armand Sr. & Armand Jr. over the last 50+ years. So, If you wish to be a shill for construction (union) jobs that's fine, just be intellectually honest enough to admit who you are with. Secondly, you debating numbers with Langseth is like a 7th grader debating theoretical physics with Steven Hawking...You've got no street cred or finance experience to debate Langseth. Finally, I was born at night but not last night. Do you think all of us have forgotten who the man behind the curtain is? I'll give you a hint...He's the Governor's Chief of Staff who also served as legal counsel for RIAC from its birth until about 4 years ago...Potential conflict of interest, or just so happens to be THE man who knows the turf and how to work the quasi-public games that go on in this State...RIHMFC, RISDIC, Convention Center, Providence Place, Studio 38...Well, Mikey, you ain't no dope so understand why the public is fed up and totally cynical about the government being here to help the average citizen...TOO MANY LIES!

Numbers can be manipulated. The bottom line is this. When the gov't wants a project completed it will do it. It will be funded. Perhaps not 100% via grants or assistance but enough to get the job done. This state has done plenty of loans to pay for infrastructure projects. So combine federal funding and loans it can be done and it must be done. To back off a project this close is insane. Furthermore, what do you propose? What would you like to see the future of the airport as? What would you do with all the vacant land already acquired? Start building houses again? I think not. Yes there has been some bad return loans. Every one knew Studio 38 was a bad deal. Where as building infrastructure at least you have something to show for it. RIAC needs to concentrate on Green Airport. Westerly should be sold as well as Block Island. Heck shut down Westerly all togeather and some of these other smalller airports with the exception of Block Island. The problem I have with Langseth's numbers is his motive. He already has made it clear he does not like the airport and would like to see it returned to farm land. That is not progress. I'll take it one step further. Those who are against the expansion should advocate for the people who live close to the runway. I have friends that live in the area that they may buy up. So if the expansion some how is delayed due to NIMBY's than it would only hurt those people close to the runway that are waiting to move. The very same people that are against it, the irony huh. Therefore, any money spent should be on 2 things. 1 is to buy the homes on their lists. 2nd the glycol plant can be upgraded or what ever needs to be done with that, if any. Bottom line, buy the homes from the people on the lists as soon as the funds become available. 2nd, glycol improvements, 3rd runway expansion. It makes no sense to me to expand the runway before the homes are bought. Regardless of the weekly numbers Langseth writes about the project is moving forward. It is like Cushman squaking about the city budget and they way he runs his numbers. Numbers are variables that change as other factors change. Numerical projections are good to have and you can read what RIAC's numbers are and get a different view. For example, under your assumption we shouldn't improve Warwick's roads because of Studio 38. Let's predict every project is a Studio 38 and nothing will ever get done. In business you have to spend money to make money.

Michael:

You point out that:

"Therefore, any money spent should be on 2 things. 1 is to buy the homes on their lists. 2nd the glycol plant can be upgraded or what ever needs to be done with that, if any. Bottom line, buy the homes from the people on the lists as soon as the funds become available. 2nd, glycol improvements, 3rd runway expansion."

RIAC consistently drags its heals on buying houses and providing noise suppression assistance. The board recently announced that the estimate for fixing houses under the noise cone has grown from 100 units to 400 units because they miscounted condos. There is no money scheduled for this activity and little for home purchases beyond what is needed to reallign Main Avenue. RIAC has yet to complete its prior programs. Buying houses has been RIAC's lowest priority over the years and they have spot purchased properties of those who are politically connected including political party officials.

Regarding general aviation, all the these airports are owned by the State of Rhode Island not RIAC. The original reason to create RIAC included the ability to maintain these essential service airports through passenger facility charges. You may not get this point but I will throw it out anyway. When RIAC attempts to starve out the general aviation airports citizens of those affected communities will come out in droves and pilots all over the northeast will be jumping all over the FAA to put an end to the strategy.

I don't get your comment about my non-support for T.F. Green Airport. Nothing could be further from the truth. My concern is that construction interests and others are throwing RIAC under the train through their demands for more and more construction -- the money for which must be borrowed. If these interests had their way all of RIAC's revenues would be consumed by debt service. That makes no sense.

Please don't put out positions that I have never taken with statements like "For example, under your assumption we shouldn't improve Warwick's roads because of Studio 38." The truth is that the state DOT has maxed out its loan program and cannot borrow another penny. That's why all road improvements are now being done with current funding. RIAC is in exactly the same position with the exception of 3 million of passenger facility charges that are needed to maintain airports not be unwisely leveraged into long-term loans that the ratings agencies will never support.

You have to get realistic about the funding of public construction projects. The money has dried up no matter how much you huff and puff.

It was bend over that mentioned studio 38, not you. Furthermore, I agree with you RIAC needs to do more to up the priority on the homes being bought and/or sound proofed. I understand the airports are state owned. That is why I mentioned privatize Block Island. The other smaller airports are for the 1% who can own a small plane, why should the state pay for that. The construction bids are under the estimated costs such as the hangers on airport rd. So, perhaps the bidding for the jobs will be less costly. So the money has "dried up" for public construction projects yet the airport expansion has been in the works for years. I huff and puff because your zero spending on infrastructure doesn't make sense to me. What do you propose? I've yet to see anything suggested alternative from you. It is the same doom and gloom. Quite frankly people are tired of hearing about the doom and gloom and want to move forward in this state. What about the money that will be spent on the apponaug project? I don't hear you having a problem on that.

Michael:

Here is my proposal. Don't waste money on the useless runway extension. Major airline consultants point out that their airline clients do not need excessive airside infrastructure. All modern planes are designed to take off and land on modest runways. These airlines are being stuck with higher and higher fees at airports that do not understand that their current runways work OK. Infrastructure cutbacks are happening all over the place now that the Republicans have forced more realistic federal budgeting. We are seeing federal deficits coming down. 7.5% air ticket tax revenues are dropping like a rock because airlines are pushing fees that are not taxed rather than base ticket prices that are taxed. Bottom line - the construction party is over at the airports. Get used to this new reality.

Don't get me started on the Republicans sequesters. If you read into it more cutbacks are hurting the economy. Even the Republicans believe it is a gamble and don't know if it will work. A lot of cutbacks are in science such as with NOAA. Research the cut backs. You worry about pollution from TF GREEN. Well the sequesters are going to increase air pollution. I'll provide links to back up my statements if I have the time. The new reality is you will never see another Republican president elected.

Check out: thinkprogress.org/climate/2013/05/16/2020351/the-first-cuts-are-the-deepest-sequester-cuts-increase-health-climate-risks/

MICHAEL; You just don't get it...All of this will be a moot point anyway. When enough folks move out, are forced out, or disgusted out, the whole house of cards will collapse, this being the finances of towns, cities, and the State as a whole. We don't have a printing press for dough like Washington. Meantime, I suggest you go back to CCRI and start with ECON 101 and get a strong background in economics, you're going to need it.

Green Airport's expansion will unlikely lead to significant non-stop West Coast & European flights;maybe an occasional flight but not numerous offerings. The runway expansion will take longer than anticipated, cost more than projected, & only benefit commercial flight traffic(in general). Green's overall cost structure does not allow it to compete with a regional airline market(Bradley/Manchester), never mind Logan.

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