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How to pay for a new airport

Users and the feds will pick up the tab.

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When the Little Rock Airport Commission voted last month to spend $10 million on repairs and upgrades on the 35-year-old terminal at the same time it’s seriously considering building a new one, commission member Carl Johnson warned it was a bad public relations move that would doom the new terminal idea. Voters didn’t want to pay higher taxes to keep more criminals in the Pulaski County Jail, he said, and spending money on the old terminal undermined the arguments for building a new one.

But while the airport will have plenty of hurdles to clear on the way to finding the estimated $255 million a new terminal would cost, a public vote isn’t one of them.

The airport is required to be self-sustaining, spokesman Philip Launius said, and so all of its revenues come from the people and businesses that actually use the airport. It gets no city or state tax money, and the federal grant programs that provide funds for capital improvements come from a trust fund that’s financed through aviation-related activities.

“If you don’t use the airport, you don’t pay for it,” he said.

The Airport Commission decided informally in July to pursue building a new terminal, and voted in September to appropriate $5 million for a feasibility study. The study, which Launius, standing in the Airport Commission’s meeting area, said “would fill this room” when it’s finished, will look at every aspect of both building a new terminal and renovating the existing building.

The current terminal is about 30,000 square feet too small, by industry standards, for the 1.3 million passengers who board flights there each year. It was also designed before airports did any kind of security screenings, and the increased security requirements put in place after 9/11 have resulted in long lines to get through metal detectors and a ticket lobby that’s crowded with several enormous baggage screeners for checked luggage. A new or renovated terminal would include those security features in its design. It would also take into account changes in how airlines do business: Passengers now rarely buy tickets at the airport, so airports don’t need huge ticket lobbies like they used to.

There’s also a trend toward “common use” facilities, meaning airlines would share access to ticket counter areas and gates, instead of permanently occupying specific areas as they do now.

There’s also a need at the Little Rock airport for more vendors beyond the security barriers.

“Having a much wider offering of retail and food and beverage services closer to where people are — past security — is becoming a way of life for airports, and we’re not very well set up for that,” Airport Commission member Jimmy Moses said. “We’re way undersized right now in terms of retail space.”

And Little Rock’s terminal, unlike some airports, was not designed for easy expansion, Moses said.

“It was really designed in the middle of the 20th century, and the whole world has changed since 1960, when the design started,” he said.

A preliminary study showed that building a new terminal was only about $30 million more expensive than renovating.

And, Launius said, “It could be that building a new terminal is cheaper than revamping, because if you have to phase in construction, you have to find ways to operate while you’re building around yourself,” Launius said. The preliminary study estimated that building a new terminal would take four years while renovating would take six; building materials would probably rise in price during those two extra years.

As for where the money for either option would come from, Launius said it’ll take some creativity on the part of the Airport Commission.

“It’s going to have to be a package, and we’re going to have to think outside the box,” he said.

One part of the package could be federal Airport Improvement Program funds, which come from taxes and fees on aviation-related activities. Most airports are entitled to a set amount of AIP funds based on the number of passengers they serve each year — Little Rock got about $4.2 million in fiscal 2006 — and can also apply for extra “discretionary” grants that are awarded competitively. But there are limits on how the money can be used — AIP projects must be used for public-use areas of the airport or for planning studies, and can’t be used on the terminal itself. So only certain pieces of a new construction or remodeling project would be eligible. (The airport has used AIP funds recently to pay for the extension of a runway and to buy a rescue/firefighting vehicle.)

The airport could also issue bonds, as the Will Rogers World Airport in Oklahoma City did to raise $98 million of a $110 million expansion project that began in 1998. It is repaying the bonds with money from a $3.50 passenger facility charge paid by every person who boards a plane at the airport. The Little Rock airport wouldn’t have to get voters’ approval to issue bonds, but they would have to be approved by the Little Rock Board of Directors and would be paid back by the airport, not from any city revenue. But the airport doesn’t have the bonding capacity to pay for a new terminal solely through bonds, Launius said.

The airport can also raise the amount it charges for parking, landing fees and other revenue generators, he said.

One source of new money was discussed last week. Officials of the Little Rock and Northwest Arkansas Regional airports said they were working on legislation to provide more money at the state level. Ideas include a share of the state’s General Improvement Fund, a share of sales tax generated at the airports by fuel sales and authority for a sales tax on airport charges, from fuel and concessions to car rentals.

Currently, parking is the airport’s largest single source of operating funds: $7.1 million, or about 35 percent of the 2006 budget. Other major sources of income are fees paid by auto rental companies ($3.3 million), airline landing fees ($3.2 million) and fees airlines pay for gate, baggage claim and other space rentals ($2.2 million). The total operating budget this year calls for $21.9 million in income and $19.2 million in expenses, giving the airport a net gain of $2.7 million.

In addition, Little Rock’s $4.50 passenger facility charge, which is earmarked for capital improvements, brought in $5.2 million last year, plus $300,000 in interest.

Launius said the $255 million estimated price for a new terminal just reflects the reality of airport construction.

“There’s very little you can do inexpensively,” he said. “We’re paying $30 million to extend a runway. But that’s 19 inches [deep] of concrete — that’s not a patio walk.”

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