Gary Jet Center wants change in airport expansion flight path

2013-03-09T23:30:00Z 2013-10-30T15:22:45Z Gary Jet Center wants change in airport expansion flight pathKeith Benman keith.benman@nwi.com, (219) 933-3326 nwitimes.com

A key tenant at Gary/Chicago International Airport is warning the airport's tentative plan to borrow $34.5 million to complete its runway expansion could "handcuff" the airport's future growth plans.

"It's unfortunate we are looking at this tremendous debt for this airport going forward, and this is an airport that never had debt before," Gary Jet Center owner Wil Davis said.

Davis and former airport director Paul Karas, now retained as a consultant by the Gary Jet Center, proposed an alternate plan for completing the expansion. It's one that would take more time, but it would solve the airport's immediate problems.

That concept would have the airport proceeding with its rail relocation plan and the leveling of a railroad embankment at the runway's northwest end. It would allow the airport to comply with federal safety requirements and enable commercial airliners to take off with full passenger and fuel loads – something they can't always do now.

The main runway expansion, to add 1,900 feet to its current 7,000-foot length, could be completed later, perhaps on a pay-as-you go basis using cash from the Airport Development Zone tax increment financing district.

"The concern is the airport has never had long-term debt," Karas said. "Never. That always gave Gary a lot of flexibility. It's a real luxury."

Currently, Allegiant airline is the only regularly scheduled commercial carrier operating at Gary. The airport also handles more than 28,000 general aviation flights per year. Those include the company jets for Boeing Corp., which are based at the airport.

The Gary Jet Center provides fueling, maintenance and other services for planes using the airport.

Funding gap

Davis and Karas make their proposal as the Gary airport authority scrambles to assemble a final financing package for the $166 million project, seven years after its start and less than 10 months from its completion deadline.

A financial analysis of the expansion project developed for the Northwest Indiana Regional Development Authority late last year showed a $49.8 million funding gap remains for the project. In addition, there is a separate, five-year, $22.5 million capital improvement plan that has to be financed.

In February, airport financial consultant Phoebe Selden, of Acacia Financial Group, laid out a plan for closing the expansion funding gap and contributing to the needed capital projects.

That plan would use the tax income from the Airport Development Zone TIF district to back $34.5 million in borrowing. It also would draw money from the zone's accumulated $25 million fund balance.

Once interest payments are added to the loan's principal amount of $34.5 million, much of the zone's income would be defined for the next 30 years. The airport had long planned to use that money for other needed improvements such as extending its cross-wind runway or a new terminal.

Using tax income and cash from the Airport Development Zone TIF district would likely make Gary taxpayers one of the largest financial backers of the project. Their contribution could outrank even the Northwest Indiana Regional Development Authority's $50 million and the Federal Aviation Administration's $57.8 million.

'Moving parts'

Airport interim Director Steve Landry acknowledges there are still "a lot of moving parts" to the financing plan for funding the airport's $166 million expansion. And he acknowledges the plan outlined by Davis and Karas has always been an option.

But so far, the airport has met all the challenges involved in keeping the runway extension and railroad relocations moving forward, Landry said last week. It plans to complete the project by the end of this year.

Landry was reluctant to identify any funding gap. He also pointed out that, even before the expansion project started, the airport told the FAA it planned to borrow some of the money needed.

There are two moving parts that the airport authority is watching closely at this critical time, either of which could significantly change the financing picture.

The first is what timeline railroads will lay out for the refurbishing of the Fort Wayne Line, which is part of the expansion project. The airport has to pay its estimated $28.4 million price tag.

Putting the project off for some amount of time would change the financial picture, Landry said.

The other moving part concerns the cleanup of ground and water pollution found where the runway extension will be built this summer. If environmental regulators require costly solutions, the airport would have to find even more money to complete the expansion.

The airport also has a $16 million request for additional funding pending with the FAA, which is already kicking $57.8 million into the project.

"At this point, it all has to do with timing and cash flow," Landry said.

The RDA, one of the project's largest financial donors, continues to carefully monitor its finances, according to CEO Bill Hanna.

He acknowledges the downside of the borrowing, which is that it ties up a ready source of airport funding for years to come. But with the FAA and airport already agreeing on a deadline of the end of this year for the project, hard choices have to be made, Hanna said.

When the expansion started in 2006, airport officials estimated it could be completed for about $90 million. By March 2012, that had swollen to $166 million.

Since then, consultant and other costs have continued to increase, raising some doubts about whether the expansion project can stay on budget.

At the airport authority's Feb. 11 meeting, the airport authority on a 5-1 vote approved paying $730,000 more to construction manager DLZ Engineering to keep it on the job during this year. In January, the authority approved hiking the $2.8 million contract for overall project manager Aecom Technology Corp. by $322,612 for performing work outside its original contract.

"There's just no cap to these expenses and no one at the airport is saying no," Karas said.

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