Kansas City officials are making a second long-shot request for federal loans to bring down financing costs on the new $1.5 billion single terminal at Kansas City International Airport.
Work is already underway at KCI, funded by $887.7 million in bonds the city issued in June. That debt will be repaid through fees the airlines pay to use the terminal. The city is expected to issue more bonds in 2021.
In the meantime, officials are lobbying the federal government to qualify KCI for a federal loan program that would reduce the interest rate on the terminal debt. The Transportation Infrastructure Finance and Innovation Act, or TIFIA, can lend up to 33 percent of eligible costs on the project.
The problem is KCI that doesn’t qualify under current rules.
Geoff Stricker, managing director for KCI developer Edgemoor Infrastructure & Real Estate, said the team identified TIFIA as a possibility in the spring of 2018, long after the company won the bid to build KCI. TIFIA has never been used for an airport terminal.
And shortly after, federal officials determined KCI didn’t qualify because it didn’t follow the procurement process required for federal projects.
At issue, according to City Manager Troy Schulte, is that federal projects require minority and female contractors to be certified through the U.S. government as disadvantaged business enterprises. Edgemoor is using minority and women contractors certified by the city, which he said allows it to draw from a broader labor pool.
Since the U.S. Department of Transportation’s initial denial, project leaders have met periodically with federal officials to find another way to secure a loan.
“We’ve known from the moment we identified it as a possibility that it was going to be difficult,” Stricker said.
The benefit of the loan is clear. By the time the $1.5 billion in debt is paid off, interest will take the total sticker price to around $3.5 billion, assuming the project budget doesn’t change. The total debt service price also depends on the interest rate the city gets on the rest of its financing.
The lower rate on a TIFIA loan would reduce total financing costs by nearly $160 million, according to a June email from Stricker to City Manager Troy Schulte.
But Stricker said if officials can’t secure a TIFIA loan, the project will go on as planned.
“If it falls apart tomorrow,” he said, the team will issue bonds as it did for the initial financing.
Getting a more favorable interest rate, Stricker said, does not change the overall budget. The airlines that serve KCI pared the cost to $1.5 billion — from $1.64 billion — earlier this year. Whether or not they might consider growing it again because of interest savings remains to be seen.
Kyle O’Neal, regional leader for Southwest Airlines’ airport affairs, said the airlines that serve KCI are supportive of the TIFIA effort. They’re not aware of any changes to the budget or details of the terminal since they agreed to the $1.5 billion price tag in February.
There’s still time for Kansas City to sway federal officials before it has to issue those bonds, said John Green, CFO of the city’s Aviation Department, “but it’s becoming a time crunch.”
“We haven’t closed the door on it,” Green said. “There are some obstacles in the way.”
Green said application to TIFIA takes about a year. To secure a loan by the time the city has to issue more bonds in 2021, he said, officials will need to know by mid-2020 that KCI has a shot.
To that end, according to interviews and emails obtained by The Star, airport officials are trying to get a meeting with U.S. Transportation Secretary Elaine Chao. But there, too, they face an uphill battle.
In early August, Edgemoor’s financial advisor, Project Finance Advisory Limited, emailed U.S. Sen. Roy Blunt’s office seeking help.
A Blunt aide, Andrew Lock, responded that he had checked with stakeholders on the project and didn’t get the sense there was consensus around TIFIA. Moreover, Lock said, TIFIA was created through the Fixing America’s Surface Transportation, or FAST, Act, which is nearing expiration.
“Asking the office to work with the DOT to make programmatic changes to TIFIA...one year before its expiration is a very challenging request and conflicts with a number of other....priorities of both Sen. Blunt and the committees that are drafting a reauthorization effort.”
Victoria Taylor, president and CEO of Project Finance Advisory Limited, said the KCI team didn’t need a law change to be eligible. She said officials wanted to ask Chao to “exercise her discretion” regarding the procurement issues that led to KCI’s initial rejection.
Since then, Blunt’s office said, it hadn’t heard anything more.
Schulte said he was not aware of Blunt’s concerns, but that the FAST Act’s impending expiration was a “perfectly compelling reason why we couldn’t pursue it.”
“The last I heard Edgemoor wanted to pursue this,” Schulte said. “From a city perspective, we were open to the conversation if it allowed us to reduce the overall cost of finance of the terminal.”
Stricker said Edgemoor was exploring alternative avenues to bring Blunt’s office on board.
Kansas City Mayor Quinton Lucas, said he wasn’t sure Kansas City was likely to get the TIFIA loan, and therefore, he wouldn’t make it a high priority.
“If they continue to pursue it, great. If they look for another alternative, also great,” Lucas said. “We have our own set of important legislative priorities as Kansas City, Missouri, government, including housing priorities, etc., and I’d prefer using, because you only get so many asks, I would prefer using it in those types of core priorities that are important for the broader electorate in Kansas City.”