[Will O' Wisp]

Originally Posted by mello

Thanks regarding financing of terminal one redo, i called Lori Weisberg at the UT and asked her if the economy goes belly up is T1 still a go and she said yes. According to her the money is there no matter what happens between now and groundbreaking in 2021. We can be assured it will be built.

Oh it will be built, that much is certain. Commercial service airport has two major methods of financing capital improvement projects. The first is Passenger Facility Charges (PFCs), which is a surcharge added to every passenger's ticket when they fly out of an airport. PFCs are capped by federal law at $4.50 a head, so with SDIA hosting 24 million pax a year it can look at pulling in a bit over $100 million annually. You typically multiply this with debt service, airport bonds typically have extremely low interest rates due to their reliability.

But PFCs aren't usually enough to fund something as big as a new terminal terminal complex, and they certainly weren't enough to fund this. So the airport went out and negotiated with the airlines under its Residual Cost Agreement (RCA). The RCA is a contract that states, in essence, that the airlines will always make the airport whole. If the PFCs can't cover all of the debt the airport needs to pay for its terminal, the airlines pay the rest. Obviously the airlines wouldn't have signed such an agreement unless they were giving a good deal of control over what gets built and when, and that control is divvied up based on the percentage that each airline makes of the airport's total operations, and so if a certain southwestern airline says SDIA needs to slow down its spend to keep that airline's profit margin in line SDIA will have to take that into account.

You'll notice something though about PFCs and RCAs. They are innately tied to how well the air travel sector is doing. If there's a market crash, and less people are flying, then they're be less PFC dollars to be had. And while the airport has a contract with airlines that states they will keep paying under the RCA, if the economy is in the crapper and the airlines are going bankrupt that won't be worth much (similar things happened in 2001 and 2008). That leaves the final, uncomfortable option of asking for the money direct from the federal government in the form of an Airport Improvement Program (AIP) grant, ideally with matching funds from Caltrans. Airport take these grants all the time, SDIA just accepted an AIP grant to rebuild a taxiway last month, but tapping the taxpayers for this much would be highly controversial. The entire airport leadership would probably be fired, construction will get delayed, the final terminal might even be downsized, but in the end our government has decided projects of this sort are a public good so they would fund it.

So as you can see the airport has funding backstops, and backstops for the backstops, and in the end unless Washington is in flames there will be money available. We built the extension to terminal two in the midst of the great recession after all. But that doesn't mean that the funding will always be immediate and available, just that it will be there eventually.

All of that said, funding isn't the worrying part. It's more likely than not to be readily available, even with some fairly radical cost increases. The biggest uncertainty right now is that we still can't decide on how to connect public transit to the airport. Hassan and Falconer are so very, very set on their 'San Diego Grand Central' at the SPAWAR site, which theyve been trying to play up as almost a done deal. But while the SPAWAR site has a lot of potential, right now SANDAG can't afford it, the transit system it's supposed to lay at the heart of is extremely controversial within the SANDAG board, the Navy has studiously avoided endorsing the idea (other than agreeing to let private developers include it in their proposals for the site, if they want to), and the local NIMBY groups are really starting to wake up to the idea that Hassan and Falconer are proposing to build a defacto second downtown in the midway district without consulting the public at all. Desmond is throwing up all sorts of complaints about cost and Gomez isn't happy about the 10-15+ year timeline, so the plan is taking fire from both the left and the right. Now Gomez has MTS studying a direct trolley connection, except now she wants it to go all the way to Point Loma or even PB, which is playing hell with the original plan of having whatever we build dead end in between T1 and T2. We're already over two months behind schedule and the powers that be can't come to an agreement.