To the Editor:
"Fitch warns T.F. Green execs against borrowing $65 million." That was the headline of a WPRI Television Nesi's Notes blog on August 18, 2011.
Ted Nesi of WPRI Television pointed out that the Rhode Island Airport Corporation (RIAC) was planning to borrow $65 million in bonds. He noted that Fitch Ratings, a bond-rating company that specializes in airport bonds, publicly announced in August that: "Fitch believes the airports ability to maintain financial flexibility and credit quality on the current traffic base will be materially diminished by additional leverage and inconsistent with the current rating."
If RIAC attempts to build the glycol management plant and extend its runways with the proposed $65 million of borrowed money, it is going to run into bond-ratings agency problems. And that is not just a problem for RIAC but for the state as a whole. A bond-rating downgrade at RIAC handed out when it attempts to borrow $65 million could threaten the entire state's bond rating.
At the conclusion of the WPRI blog, Mr. Nesi points out: "RIAC spokeswoman Patti Goldstein did not respond to phone and email messages from WPRI.com. The agencys executive director, Kevin Dillon, did not respond to an email message."
I encountered a similar lack of comment from RIAC when I passed the following proposed letter to the editor of the Warwick Beacon by the airport corporation. This is what I sent them:
"It's interesting to note that RIAC does not have the authority to borrow money for infrastructure. Its parent, the Economic Development Corporation (EDC), does that. The Rhode Island General Assembly must approve this borrowing. RIAC and EDC must comply with Rhode Island's debt-ceiling laws and regulations.
"One of the regulations is that the EDC cannot float a bond that will cause rating agencies to lower bond ratings. Fitch Ratings has already warned RIAC that additional borrowing will cause a ratings downgrade unless passenger counts increase substantially. There is no evidence that many more passengers will use T.F. Green in the near future.
"RIAC has about $40 million in unallocated cash in its coffers, enough to build the $23 million pollution-control plant. In December, the RIAC Board voted to build two jetways on speculation, using $1.7 million to do so. There is no guarantee that a new airline will come by to use these jetways. RIAC still has plans to purchase more commercial property on Post Road, potentially adding to the existing fallow lots that blight the gateway to the airport. This money should be used to fix the pollution problem.
"Where does that leave the safety-enhancement project for the crosswinds runway? The State of Rhode Island must come up with a 20 percent match to federal grants to complete this project. RIAC must show in its grant application for federal aid that it has the capacity and the plan to finance the remainder of the project's costs. How does RIAC/EDC do that with the Fitch Ratings warning of a credit downgrade sounding an alarm?
"Here's an idea: RIAC has acquired a fair amount of property around the airport for noise mitigation purposes. It has plans to lease out some of that property to commercial venues. Perhaps it should simply sell this property as the U.S. Government Accounting Office advises. The proceeds could be used to help fund the safety improvements."
RIAC's response to these observations was simple. Management denied all of the above. When pressed, RIAC management reported: "(We) will sort out his (Langseth's) reference again to a state bond law."
The Warwick City Council is in non-public negotiations with RIAC regarding airport expansion. Labor unions and the Greater Providence Chamber of Commerce are demanding that the City Council cave in and agree to let RIAC grab Winslow Park, a city property, without any known financial capability to complete the expansion of T.F. Green Airport.
RIAC should focus on building the glycol plant. This will help fix the pollution problem and create some construction jobs for union people. RIAC has the money to do this project now and should commence construction as soon as possible.
Executive Director, Greenwich Bay Watershed Group
Editor's Note: RIAC CEO Kevin Dillon, who was shown this letter, questioned Langseth's figures and said many of his assumptions are faulty.