Drilling take not eyed for airport debt
By Aaron Aupperlee
Published: Sunday, Sept. 1, 2013, 9:10 p.m.
Pittsburgh International Airport likely will not use a portion of the estimated $500 million it could reap from drilling for natural gas to pay down its $339 million debt.
Airport officials believe there is little economic advantage to channeling money from the Marcellus shale drilling toward the debt and away from lowering gate fees or aiding with development.
“Do you really care if your rich uncle puts $500 toward your car payment or $500 toward your house payment?” said Randy Forister, development director for the Allegheny County Airport Authority. “Overall, it's the same impact on our budget.”
The airport expects drilling will generate $4 million to $6 million annually in royalties, plus $46.3 million in up-front money from Cecil-based Consol Energy Inc. The coal and gas company plans to drill 47 wells over five years, starting in spring.
The airport authority board discussed using drilling revenue to help pay down the debt but decided it would result in little financial benefit, said spokeswoman JoAnn Jenny. The state gives the airport $12.5 million a year in casino tax money to put toward debt. The airport expects to be debt-free by 2018, Jenny said. Construction of the terminal that opened in 1992 saddled the airport with about $1 billion in debt, Jenny said.
“I do think there is merit in what the airport is saying,” said Mary Ellen Wriedt, adirector at Standard & Poor's who reviewed the airport's finances. “I think there are ways the airport can use cash that will be potentially more beneficial.”
Standard & Poor's examined the airport's debt in June and affirmed its “A-” rating granted in 2012. The rating agency did not consider gas drilling revenue in its analysis, Wriedt said. Its next review of the airport's finances is scheduled for summer 2014.
Moody's and Fitch Ratings upgraded their assessments of the airport's debt this year. Both noted the anticipated drilling revenue in their reports.
To assess the long-term financial stability of an airport, Standard & Poor's looks at how much it costs airlines to use the airport, how much cash on hand an airport has and the ratio of debt to planes landing there. The Pittsburgh airport's plan to lower fees and invest in development will improve two categories, Wriedt said.
Standard & Poor's considers the airport's debt-to-plane ratio to be moderate.
“The basic feeling right away is they should be paying it off. Maybe not. You have to consider all the angles,” said Allegheny County Councilman Michael Finnerty, D-Scott. “It would be like paying your mortgage off. Sometimes it's not advantageous to pay your mortgage off.”
If the airport has a low interest rate on its debt, Finnerty thinks it should invest money from natural gas into lowering fees and developing acreage, with the hope of producing more revenue.
Yearly interest on the airport's bonds averages about 4.8 percent, Jenny said. Of the $65.7 million the airport will pay toward its debt in 2013, 28 percent — $18.4 million — will go toward accrued interest.
Because the authority oversees the airport, County Council has no say in how the airport spends the money, which frustrates Councilman Matt Drozd, R-Ross.
Drozd wants the airport to work to pay off its debt early and use some of the drilling money to reduce landing fees.
“I'd be very disappointed if they did not reduce some of that debt to make it more fiscally sound,” Drozd said. “There's definitely enough to do both and make that airport sing.”
Aaron Aupperlee is a Trib Total Media staff writer. Reach him at 412-320-7986 or email@example.com. Staff writer Tim Puko contributed.
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