Airport seeks $3 billion for terminal revamp
Written by Scott Blake on March 19, 2014
Miami International Airport administrators are working to persuade county officials that financing the redevelopment of the airport’s outdated Central Terminal should be an inside job – at a cost of more than $3 billion.
The county’s Transportation and Aviation Committee decided last week to hold off seeking proposals from the private sector for the project after the airport’s administrative team made a case that it can do a better job at the financing than a private developer.
The team also said it would be more mindful of what’s best for the county-owned airport when planning out the construction and retaining revenues from the new terminal.
There is not yet a firm schedule for the project, but airport officials are considering having the county start to sell bonds to finance the project in 2018 with a possible start date for construction in 2020. The team’s estimated cost for an in-house project: $3.1 billion to $3.3 billion.
County Commissioner Dennis Moss, the committee’s chairman, expressed concern about the county getting stuck with ballooning project costs instead of allowing a private developer to take that risk.
“How do we ensure against embarrassment if we go through the project with one number [as the cost] and later find out it’s twice as much?” he asked.
Mr. Moss had placed a resolution on the agenda for last week’s meeting that called for Mayor Carlos Gimenez to look into seeking “expressions of interest” from private firms willing to finance, construct, and renovate the Central Terminal.
However, after listening to the airport team’s presentation, Mr. Moss and other committee members tabled the resolution while giving the team more time to hone its plan and report back to the committee.
With the proper planning by the Miami-Dade Aviation Department, which manages Miami International, the project’s financing and construction costs could be carefully controlled, the airport team said.
“You need to have the scope [of the project] well-defined and not deviate from it,” said Peter Ricondo, an outside consultant to the Aviation Department.
The airport team said its strategy is to do the project in 12 phases so the Aviation Department could halt the work and not commit to financing additional amounts if passenger traffic at the airport slows in the future and decreases the need for more terminal space.
“We can do it as fast as the numbers show,” said Randy Topel, an outside financial advisor hired by the department.
The team warned of the implications of leaving the financing to a private developer.
A private developer, the team said, would naturally want a long-term lease on the new terminal once it opens to capture revenue from it to recoup its investment or pay off its debt from the project – money the department could retain for many years to come if it carries out the project itself.
“A private developer would want income from the project for the next 30 to 35 years,” said Anne Lee, the department’s chief financial officer.
If the county leaves the financing to the private sector, Mr. Topel added, “you don’t take the risk [with the debt], but you lose the revenues later.”
Allowing a private developer to carry out the plan, the team suggested, could add to the cost for airlines and others to use the new terminal, thus making Miami International a less attractive place for airlines and other businesses.
A private developer, the team also suggested, might not be concerned that much with the overall welfare of the airport, perhaps wanting to offer services in the new terminal that would “cannibalize” similar services or businesses in other parts of Miami International.
Mr. Ricondo said the Aviation Department has been discussing an in-house Central Terminal project with American Airlines – the airport’s main carrier – and other airlines there, and they are “on board” and “comfortable” with the department handling the project.
Ms. Lee said she is confident the department could get better financing rates than if a private develop were to handle it.
Because Miami International has “aggressive” growth in passenger traffic, the team suggested, the department’s bonds should earn high grades from credit rating agencies, making the bonds more appealing to investors.
“As long as we can show adequate growth [of airport traffic] for the rating agencies, we can frame [the project] in a timely manner,” Mr. Topel added.
The Aviation Department already has handled construction of new North and South terminals at Miami International, financing the projects as part of a more than $6 billion package of bond sales. The department also has handled smaller renovations of the Central Terminal through the years, but the current plan calls for an entirely new termnal.
The department has outlined the project as part of the airport’s master plan. It calls for a demolition and rebuilding of the terminal that would change the configuration from three concourses – currently E, F and G – to two, providing gate space for larger aircraft.
The Central Terminal, Mr. Ricondo noted, “was built for a much older generation of aircraft.”