Yearly airport costs to nearly double in 2015, revenue streams sought
By Risa Polansky
A rise in debt service payments on Miami-Dade Aviation's ongoing $6.2 billion capital improvements program means that, combined with growing operations expenses, the airport is to face a projected $500 million in new annual costs beginning in 2015.
The department has long been paying down debt on the capital program, which kicked off in the early '90s and is comprised largely of Miami International Airport's new north and south terminal projects.
But payments are soon to begin climbing.
"The debt service increases between 2010 and 2018. After 2018, it's level," said aviation Chief Financial Officer Anne Cyrcle Lee.
Beginning then, debt service payments are to remain flat until 2041, when the bonds are paid off.
"Ideally, you begin seriously paying for debt when you're earning revenue from the assets you constructed with the bond proceeds," Ms. Lee said.
The new South Terminal is essentially complete. Construction on the North Terminal continues.
The aviation department has slightly more than $5 billion in aggregate outstanding bonds to pay down between now and 2041.
Some are refinancing of earlier issues.
And there are still some issuances to go. Those are already factored into budget projections, Ms. Lee said.
By 2015, total annual aviation operating costs are to sit at about $1.1 billion, up from today's $600 million, a memo from County Manager George Burgess says.
The aviation department balances its annual budget by charging airlines fees to fill any gaps between revenue and expenditures, said Miguel Southwell, aviation deputy director for business retention and development.
Miami-Dade owns and operates the airport, he said, but "the backstop for operating and construction dollars is borne by the airlines that operate at the airport."
Generally, the shortfall is about 10% of the airport's annual budget, he said.
He estimates that by the time debt service peaks, the gap is to grow to about 22%.
Already, Miami-Dade is a "high-cost airport" compared to competitors such as Fort Lauderdale-Hollywood and Atlanta, Mr. Southwell said.
In both competing airports, airlines pay between $4 per boarded passenger, compared to about $17 here today.
To prevent drastic increases as the airport's operating costs grow, management's idea is to generate extra revenue through non-aviation-related means "so all of that burden will not be placed on the airlines and price us out of the market," Mr. Southwell said.
The rising costs are not a surprise to aviation officials, Ms. Lee noted.
"This is all planned — it's not accidental or unusual," she said. "We knew the debt service would increase the cost per enplaned passenger. However, it's more advantageous if we have more commercial revenue."
To generate that revenue and offset the burden on the airlines — keeping Miami International competitive — airport managers have placed several ideas on the table, including slots in airport terminals, rock mining at Opa-locka West Airport and private development on airport land, among others. They spelled out a package of revenue-generating ideas last week to the county commission.