GARY | Less than one year from its completion deadline, the Gary/Chicago International Airport is scrambling to fill the last financial potholes in its $166 million expansion project.
• In its latest financial road map drawn up in October, the airport plans to use its taxpayer-funded Airport Development Zone to secure up to $49.8 million. That is far more than in earlier plans.
• This week, the airport authority is expected to vote on a contract that will allow it to tap a $30 million grant from the Northwest Indiana Development Authority, which has been on hold for a year-and-a-half.
• Last week, in a move to head off any cash-flow problems and keep contractors on the job, the airport authority at its Monday meeting extended the deadline for repaying a $12 million loan it pulled from the Airport Development Zone in June.
"With this shortfall we have, we are trying to get some cash," said Airport Authority President Nathaniel Williams after the authority's meeting.
Williams also revealed that although the Northwest Indiana Regional Development Authority approved a grant of $30 million for the airport expansion 17 months ago, the airport has not yet seen a dime of that money.
"I don't know what's going on on their side," Williams said when asked why the RDA money was not forthcoming. "But we are hoping we can finalize this piece, so we can get those dollars and pay our bills and transfer the $12 million back to the Airport Development Zone."
The RDA's side
The $30 million the RDA board of directors approved for the project in May 2011 was held up while the agency undertook an exhaustive examination of the airport expansion project's finances, according to RDA President and CEO Bill Hanna. That review is now complete.
A joint RDA/airport committee has now agreed on new contract language to guarantee any airport borrowing using the Airport Development Zone solely for the expansion project, Hanna said.
The airport authority board will have to vote to approve that contract before any of the $30 million can be released, Hanna said. He hopes that will happen at an authority meeting scheduled for Wednesday.
"We need to be able to tell the state of Indiana we not only have the funds in place, but we have them locked in place," Hanna said.
The Airport Development Zone is a tax increment financing, or TIF, district that every year gets a cut of property taxes collected within a broad swath of the city's west end. It includes residential neighborhoods as well as businesses.
A Times analysis of numerous airport financing documents shows the airport, when the RDA money is added to the mix, has rounded up $116.4 million for the expansion project. It intends to get the additional $49.8 million with what will be the largest borrowing in airport history, perhaps mixed with a cash withdrawal from the Airport Development Zone. The zone has a $22 million cash balance.
The documents analyzed by The Times were obtained through the filing of public-records requests with the airport authority and from the RDA during the past two years.
Cash flow problems
There have been signs of a cash-flow problem with the project during the past year.
A number of contractors working on the expansion said they are getting paid late. Gary Material Supply owner Otho Lyles III said he had to wait two months to get final payment on his contract for hauling away contaminated soils.
Superior Construction President Ted Cuson, whose company has the $11.6 million contract for building the new Airport Road overpass, said his company had the same experience when trying to collect its periodic progress payments.
"The fact is we are financing millions of dollars of this project for them right now," he said one week ago.
The expansion project was nearly fully funded when its total cost was estimated at around $90 million in 2006. In March, airport officials released a new cost estimate of $166 million.
In August, the airport authority asked the Federal Aviation Administration for $24 million to help deal with those increased costs.
Last week, airport consultant John Clark told the authority board the FAA has ruled out about $8 million of its request. However, the federal agency has indicated it will consider up to $16 million in additional funding.
The FAA and airport have agreed on a deadline of December 2013 for completing the project.
Airport interim Director Steve Landry said he is confident the extension project will get done and sufficient funding will be rounded up.
"To proceed with the railroad realignment and the runway extension, we have that money," he said.
Covering the shortfall
No matter what additional money, if any, the FAA may provide for the expansion project, the airport authority appears to have set course for the largest borrowing in its history.
Earlier this year, the authority took the first step in that process, hiring Cender & Co. of Merrillville to begin looking into issuing airport bonds for investors to buy. The airport would back the bonds with tax income from the Airport Development Zone, according to Cender & Co. financial adviser Dan Botich.
After several inquiries on expansion financing by The Times, Landry acknowledged last week the airport is allocating as much as $38 million in TIF district financing for the project. As recently as April 2011, the airport was allocating just $13.2 million in TIF financing for the project, according to its application for RDA funding.
Botich did not think the fact Gary is a city that has skated on the edge of bankruptcy for years would affect the airport's ability to borrow the money it needs. That's because the Airport Development Zone has a steady flow of income from a broad taxpayer base.
Airport officials would soon like to put the $12 million loan it pulled in June back into the zone fund to have the entire $22 million intact to provide a reserve fund for any borrowing, Botich said.