Tuesday, October 23, 2018
Business

Tampa airport lines up millions in alternative project financing before final vote on GOP tax bill

TAMPA — Tampa International Airport officials started out trying to hedge their bets against one kind of uncertainty.

They ended up on guard against another.

But the defense was similar for both: get ready to borrow money a little sooner than expected, before something happens to add to the cost.

The Hillsborough Aviation Authority governing board held a special meeting Wednesday where it unanimously approved two measures designed to protect itself against rising interest rates, an unpredictable regulatory environment or both.

"What we’re basically trying to do with these two transactions is protect the authority against uncertainty," said Damian Brooke, the airport’s executive vice president of finance and procurement.

First, the aviation authority board voted to borrow $54.7 million from the bond market using a proposal from TD Bank. The airport expects to pay a fixed 2.56 percent interest rate on bonds maturing in 2031. The money will be used for part of the second phase of the airport’s massive $2.3 billion expansion.

Airport officials began looking at financing options after the U.S. House of Representatives passed a tax bill in November that would have eliminated the tax exemption for private activity bonds, a form of financing that many public agencies use to finance big projects.

RELATED COVERAGE: Congressional tax bill could make Tampa airport borrowing more expensive

The final version of the Republican tax bill kept the private activity bond tax exemption — good news for the airport and local governments — and the House gave that version of the bill the final legislative approval it needed a few hours after the airport board met.

But in the meantime, the airport’s financial advisors looked at the pricing on the TD Bank bonds, and told the airport it could save money by going ahead now despite the favorable change in the tax bill.

That’s because the Federal Reserve is expected to raise interest rates in the coming year, and the airport expects to go to the bond market for its phase two financing in October. The expected interest rate bump is projected to add 60 to 80 basis points — 6/10ths to 8/10ths of 1 percent — to the interest rate the airport likely will get in October.

By comparison, the cost of doing the $54.7 million bond issue now will be an estimated 8 basis points, a meaningful savings compared to the higher interest rate that bond market professionals expect.

In all, airport expects to need about $640 million in financing for phase two, and it was looking to borrow as much as $211 million before the end of the year, but the $54 million that TD Bank offered was the most it could get on a compressed timetable. So the board agreed to go ahead with the part of the financing the airport could get now.

In a second move, the airport board voted to tweak a long-standing line of credit it has with SunTrust Bank. The effect of that transaction would be to allow the airport to draw up to $157 million on the line of credit.

Despite the vote, that’s not likely. Airport officials said they only planned to do that if the tax bill somehow fell apart at the last minute and opened the possibility that Congress could get another shot next year at repealing the tax exemption on private activity bonds and pushing up the airport’s long-term borrowing costs.

The aviation authority was not the only Tampa Bay area government that weighed the potential impact of the tax bill on its financing.

The Tampa-Hillsborough Expressway Authority this month refinanced $152 million in bonds at lower interest rates because the tax bill was expected to eliminate the advance refunding of bond issues, something that local governments often do to take advantage of lower interest rates.

Tampa Mayor Bob Buckhorn said Wednesday the city did not plan to try to refinance any more of its debt before the tax bill goes into effect Jan. 1. That’s because it has already gone to the bond market to get the lowest interest rates it can on as much of its debt as possible.

Although the original House version of the tax bill also would have eliminated the tax exemption for bonds to build stadiums, BondBuyer.com is reporting that the final version of the bill preserves the stadium tax exemption.

That’s good news for local officials who could have to figure out how to put together a huge, complex and publicly supported financing plan to pay for a new Tampa Bay Rays ballpark.

Contact Richard Danielson at [email protected] or (813) 226-3403. Follow @Danielson_Times

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