I just saw a story today that said Miami Airport will be selling $600 million in bonds to support its capital program. This sale will be made possible by a provision in the recently enacted stimulus bill that eliminates the alternative minimum tax (AMT) on many airport (and certain other) bonds for the next two years. Miami is planning to sell another $1.3 billion according to this story before this provision expires.
This is on top of stories about the Metropolitan Washington Airports Authority (MWAA) selling $400 million worth of bonds; with Philadelphia and Nashville selling somewhat lower amounts. All made possible because of this provision; in fact due to the credit crisis, MWAA had been previously unable to sell their bonds. Houston is also considering a bond sale.
This may seem like an arcane provision of an obscure tax law, but what it means is economic development, needed aviation infrastructure improvement, and jobs. A great deal of airport infrastructure is financed through bonds, and the credit crisis had brought that market to a halt. There are still problems, but removing AMT has helped loosen up the market and make this financing possible. We believe that billions more will be sold over these next two years, resulting in even more infrastructure improvement and job creation.
ACI-NA has made this a priority issue for the past four years. You see, the bonds that are subject to AMT are classified as private purpose bonds, even though most people would say airport infrastructure is a public purpose. The stimulus bill gave us an opportunity to address this and it happened. It is awfully nice when you see the result of such work lead to important projects being built and jobs created. It also helps lower costs for airports and airlines alike, allowing capital investment dollars to go further.
One final note: it is worth noting that many airport bonds (30% or so) are backed by passenger facility charges (PFC). We are working for an increase in the PFC right now, which will lead to a better system for our passengers and communities.
With sensible policies, airports are able to generate billions for capital investment, taking pressure off government treasuries and providing great benefit to the traveling public. What happened in Miami today; in Washington, Philadelphia and Nashville earlier; and will happen in many other communities in the coming months; is a great example of that.