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News Article - February 26, 2009

PHL TO BENEFIT FROM ECONOMIC STIMULUS  
By Marcia Gelbart

Inquirer Staff Writer

  Officials at Philadelphia International Airport have long been planning to expand Terminal F and redesign part of the baggage system servicing US Airways passengers using Terminals B and C. Thanks to the federal economic stimulus plan, those and other airport construction projects just got considerably cheaper.

   In all, Philadelphia's airport will likely save at least $3.8 million a year on projects expected to launch in the next two years, according to acting aviation director Mark Gale. "This will help us achieve our goal to stay as competitive as we can," he said.

   The savings stem from a section of the stimulus that exempts bond investors from having to pay what is known as the alternative minimum tax on proceeds from certain airport bonds. All of the construction projects at issue would be funded through such "private activity" bonds. Right now, investors must pay the tax, which makes many airport bonds less desirable and means airports have to pay higher interest rates in order to float them.

   But with the exemption - which would be in place for this year and next - those interest rates are expected to drop, making the bonds more attractive to investors. Airport officials said they are planning to issue two such bonds. One is a $41 million "refunding bond" that, with the tax exemption, is estimated to cost the city at least $350,000 less a year.

   The other is a much larger $400 million issue, to be floated next year, to pay for significant work in Terminal F, including the relocation of the baggage-claim area and an expansion of the concessions, as well as a modification of the outbound baggage system for Terminals B and C. Officials say this bond will now be at least $3.5 million a year cheaper. "The reduction will help us minimize our annual costs," said Edward Anastasi, the airport's deputy director for business and finance. "The more you can reduce your interest costs, that leaves you more room to fund additional bonds to pay for additional projects."

   The airport, although city-owned, basically pays for itself, with revenue coming from the rent that airlines pay for space for ticket counters, offices and baggage claims; airline landing fees; parking revenue; and concession fees from the airport's restaurants and retailers. Officials say they hope the stimulus will benefit the airport in other ways as well, including providing $15 million to repave a runway.

   "The bond provision is just part of the good news," said Rep. Chaka Fattah (D., Pa.), referring to additional stimulus dollars Philadelphia will receive. He said much of the money will reach city coffers in the next 100 days. "The president's goal is to move these dollars out very quickly," Fattah said.

Source - Philadelphia Inquirer



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