We’ve all heard the disturbing rumblings which, like a massive 747
listing
dangerously as it comes in for a landing, threaten to become a
financial
disaster for the city’s new airport at Bergstrom. There have been
reports of
costs going up while federal funding is slashed; of Councilmember
Brigid Shea
berating the city’s own consultant firm, Parsons Brinkerhoff, for
presenting an
“indecipherable” cost report at a work session on April 19; and, as
reported in
the Austin American-Statesman on April 18, of a generation of
schoolchildren at Del Valle who may grow up hard of hearing because
their
schools rest on the outskirts of a proposed runway. Some of the costs of the new airport have gone up since voters
approved the
bond issue in 1993, while savings have been found in other areas, such
as a
reduction in the length of the new runway to be built. In all, the cost
of the
project has increased a little more than $42 million. Funding sources
have
shifted as well, as austerity becomes the rule at the federal level,
and the
city has had to become more savvy in its pursuit of outside funding. In
discussing the figures associated with the new airport, we enter the
confusing
realm of the High Finance Zone, and before we get started, it’s
important to
note a few things.
First of all, while the costs of actual construction for the airport
total
$624.9 million, the Federal Aviation Administration (FAA) is footing
the bill
for $134.7 million of this amount for its own facilities: “control
tower, radar
equipment, etc.,” according to Charles Gates, director of the city’s
Aviation
Department. This leaves $490.2 million the city will pay with a
combination of
bond money and other sources we’ll get into later.
Next, while issuance of $356 million of the approved $400 million
in bonds was
approved for construction of the airport and debt service, the Aviation
Department is now asking for an increased issuance of $372 million.
Why? Gates
explains that of the extra $16 million, $13.5 million is needed for the
reserve
fund (explained below), and this increase will necessitate a
proportional rise
in the approximately $100 million in “capitalized interest fund,” money
that
will pay insurance, premium, and miscellaneous fees on the bonds and
interest
on the debt until the new airport brings in revenue.
Third, there is an extra 10% in “contingency money” built into the
cost of
each proposed construction project.
There are a number of reasons why the total cost has increased in the
last two
years. What follows is a brief synopsis of those increases, based on
figures
from a city Aviation Department document entitled “Revised Forecast vs.
Master
Plan.” The Master Plan numbers come from original cost forecasts made
in April
1993, while revised forecasts were made in October 1994.
Costs That Have Gone Up:
* The estimated cost of land acquisition at Bergstrom has more than
doubled,
from $5.6 million in the Master Plan to $11.5 mil-lion now. This is
largely due
to the fact that original appraisals were made in 1992, while the
higher price
is based on more recent appraisals. This figure could rise even more if
the Air
Force Reserve Base, which currently resides in the center of the
planned
airport and is on the federal list for closure, is shut down and the
city
decides to purchase the property.
* Noise mitigation costs have more than tripled from $12.4 million to
$37.5
million, largely because of a recommendation by city consultants that
the Del
Valle Schools be purchased and moved rather than simply
soundproofed.
* Demolition costs rose from $12.5 million to $20.5 million, after the
city’s
environmental consultant issued a revised estimate that approximately
$17.6
million will be required for additional cleanup after the city
demolishes
unused buildings.
* The costs of utilities have nearly quadru-pled from the original
estimate,
from $6.7 million to a current $24.5 million. The city found that the
entire
40- to 50-year-old utility system, which currently services Bergstrom,
will
have to be replaced, while the initial estimates assumed the system was
viable.
* Support facilities, which include fire and police service, have risen
slightly in cost from $8.9 million to $9.5 million. The city originally
assumed
that an existing fuel farm – a facility used for storing vehicle and airplane fuel – could be used, but contamination from fuel leakage at the farm will
require
construction of a new one. Interestingly, the support facilities cost
initially
jumped to $12.7 million as of August 1994, but was reduced in the
revised plan
issued later that fall, since the city has found it can use an existing
hangar
to house support personnel and equipment instead of building a new
facility.
It’s a common theme and one that accounts for much of the airport’s
decrease in
costs of certain areas. “When we did a review of the project in
August
of ’94, we found some costs coming in higher than we imagined, so we
reduced
the scope of the project,” Gates says.
* The costs of program management – the money the city pays its consultant to oversee construction – have risen from $25 million to $33.5 million. According to the revision
document, “The program management consultant will also provide resident
construction inspection services which were not included in initial
estimates.”
* The Aviation Department also plans to ask for an increase in the
reserve
fund, which essentially provides collateral against the
$400
million debt.
Technically, this cost has been decreased from $20 million in the
Master
Plan to $11.5 million, but the financial bond houses in New York have
made it
clear that $25 million in the reserve fund is much more desirable.
Since the
overall airport
cost is rising, the amount in the reserve
fund must rise to reflect those increases; it’ll cost $16 million to
bring the
reserve fund and the capitalized interest fund to a comfortable level.
Costs That Have Gone Down:
* The cost of the terminal complex has dropped from $137.1 million to
$127.9
million, says Gates, again due to a reduction in the scope of the
terminal,
which will still include the planned 20 gates. The terminal’s central
plant – the power unit which runs the terminal’s utilities – will now be privatized, however, and concession space will have to
be
finished by the companies that will use it. Gates notes that
“there
could be another issuance of bonds if there’s a need to increase the
size of
the facilities in the first five years.” A likely candidate for
expansion would
be the number of terminal gates, from 20 to 24. Bonds to pay for that
could
come out of whatever is left of the $400 million after the initial bond
issuance.
* Airfield facilities – which include the new east runway and improvements on the existing west
runway – have dropped in cost from $144.5 million to $128.9 million.
In the August, 1994, evaluation, this cost had ballooned to nearly
$170
million. But the city reduced the length of the new runway from 9,000
to 7,000
feet, reduced the number of high-speed runway exits, and eliminated
cross-taxiway bridges. A news release from the mayor’s office dated
April 28,
however, states that “the city will continue to plan and work to
receive [FAA
grants] for the additional 2,000 feet.”
* The elimination of a proposed underpass along the terminal access
road has
reduced the cost of landside facilities from $63 million to $54.4
million.
* Preliminary planning costs have been shaved to $6.1 million from $8.7
million, and other costs listed under “supplemental” have been cut
nearly in
half, from $14.6 mil-lion to $7.9 million.
Funding That Has Increased:
* Estimated revenues from the $3 surcharge on all tickets at Mueller
have risen
to $26.8 million from original estimates of $18.6 million, as outgoing
traffic
from Mueller continues to rise.
* Other capital generated from Mueller operations, including money left
over
from a 1989 airport bond issue, has increased from $49.2 million to
$62.3
million.
* The bond issue itself: According to Gates, the city Aviation
Department never
planned to shoot the whole approved bond issue wad at once. Even the
jump in
initial bond issuance from $356 million to $372 million has not yet
been
approved by the city council, and the rest of the bonds, as Gates
points out,
may go for later expansion.
Funding That Has Decreased:
* Uncle Sam has not smiled on Bergstrom. While the city originally
expected to
get $118 million in various federal funds through the FAA, this amount
has
since dwindled to $94.9 million. These figures do not even include the
$30
million dollars in “noise reduction” money that the city was counting
on to
purchase the Del Valle Schools. “If we don’t get those monies,” Gates
says
simply, “we won’t be able to acquire the Del Valle Schools.”
Presumably, the
schools would then remain where they are and have to settle for
soundproofing
measures.
However, according to Senator Gonzalo Barrientos’ office, he may
attempt to
make amendments to the current education bill that would allow
industries
locating in property-poor districts to make payments in lieu of taxes
to the
school districts to encourage growth in the those areas and
improvements to
those schools. In Del Valle’s case, Barrientos’ legislative aide,
Richard
Hamner, says that such an amendment could allow industry to donate land
to the
school district to facilitate the relocation. n All of this leads to the current airport budget which has risen to
$624.9
million from the original 1993 estimate of $582.8 mil-lion. After
digesting all
of this information, a few points become salient: First, construction
costs
have not been the major factor leading to the inflated budget. In fact,
in many
cases these costs have actually gone down. Things like the Del Valle
Schools
recommendation, the ancient utility system at Bergstrom, and financing
charges
have been the main culprits. Little comfort can be taken in this,
however,
since hardly any ground has yet been broken at Bergstrom for actual
construction, and these costs are almost certain to fluctuate some
more.
Second, while the expected FAA funding dropped dramatically, the city
is still – at least for the time being and at least on paper – well within its $400 million bond parameter. “The guesses we made at
the
beginning [with the Master Plan] were just that – guesses,” says Councilmember Gus Garcia. “But we’re not outside the
range of
normal variations. We expect some things to go higher; some will go
lower.”
Councilmember Brigid Shea, meanwhile, noting that the airport’s Master
Plan was
essentially rushed out so the city would have some figures to show the
public
before the1993 referendum vote, adds that cost fluctuations “point up
some of
the concerns I had with the accuracy of the Master Plan… there will
definitely continue to be fluctuations.”
This article appears in May 12 • 1995 and May 12 • 1995 (Cover).