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Proposed amendment would give airports bonding power

Boise airport terminal could benefit from the amendment proposal.

Boise airport terminal could benefit from the amendment proposal. Photo courtesy Boise Airport

A proposed amendment to the state constitution would free airports and other political subdivisions to go into long-term debt without putting the measure before voters, as is required under a 2006 State Supreme Court ruling.

The amendment, proposed by Rep. Fred Wood, R-Burley, and Sen. Joe Stegner, R-Lewiston, circumvents the so-called Frazier Rule, which requires a two-thirds majority vote to approve bond financing using local tax dollars. The Idaho House State Affairs Committee approved it on Feb. 18. The full House is expected to debate the measure (HJR 005) on Feb. 22.

Under the proposal, no vote would be necessary if entities leverage financing through revenue bonds or special facility bonds which are repaid by revenue from services, rather than tax dollars.

Richard McConnell, manager of the Boise Airport, testified in favor of the measure. He said in an interview that allowing entities like the airport to leverage bonds using their revenue allows them to invest in infrastructure without burdening tax payers. The current rules, he added, have ham-strung economic development projects at the airport for years.

“The position we’re in here is unique to the state of Idaho,” he said. “We’re cut off from access to these financial markets and, as a result, we cannot meet the mayor and governor’s goals for new job growth. … Under today’s standards and law it’s highly unlikely that we would have been able to construct the current terminal building, for instance.”

Other examples of how restricted bonding authority hampers investment at the airport: several hundred acres of airport-owned land which it can’t pursue for industrial or economic development, and the inability to invest in expanded cargo facilities.

“As we grow from the cargo standpoint, we need to be able to accommodate those demands,” McConnell said, adding that carriers like FedEx and UPS will someday run out of room and may need to relocate to larger facilities.

“They’re coming to us with the scenario,” he said. “It’s a community partnership thing. We don’t want to be the part of a proposal for some new company that can’t meet their needs.”

The Boise Airport, a separate enterprise fund of the city of Boise, currently operates entirely on revenue generated at the facility. McConnell said those revenue streams come from a range of services, including federal aviation grants, passenger and customer facility charges, and rates, rents and ground leases. It even contributes to the city’s general fund by purchasing services like police, fire, legal counsel, human resources and IT.

“We are a money maker,” he said. “Almost everything we do is catered toward being as self-sustaining as possible.”

With non-local tax revenue sources paying for 100 percent of the airport’s operations, McConnell sees no reason why the facility shouldn’t be able to incur long-term debt leveraged by its own money. He also chafes at the voter approval requirement under the current rules because it restricts the vote to the city of Boise, effectively shutting out other airport users from having a say in whether improvements are funded.

“Upwards of 70 percent of our users aren’t Boise residents,” he said. “The airport is a regional and statewide entity. Our impact area is five states: Washington, Oregon, Nevada, Utah and Idaho. It’s not just the boundary of the city of Boise.”


About Zach Hagadone

3 comments

  1. I am the “Frazier” of the decision which is why they are attempting an end run around voters. Here are just a few reasons to turn down the proposed amendment.

    The net effect of this amendment is to deny CONSTITUTIONAL RIGHTS to citizens. Currently citizens have a right to approve profound long-term debt projects at airports. Without voter ascent there will be liens on public property owned by all the citizens of a city…creating a legal and financial nightmare.

    Here is how it works. When citizens go to the polls and approve a long-term debt, they offer the FULL FAITH AND CREDIT of the city. When an entity like an airport enters into debt with future revenues as the sole revenue source to pay the bills, it places the public building or land in jeopardy because public assets are used as collateral for the bonds. Typically, these unsecured bonds come at a higher interest rate than those backed by the full faith and credit of the city–backing obtained only through ascent of the voters.

    Despite what one of the “trusted” rating agencies may say, it is also a terribly risky investment to purchase bonds when the only safeguard is collateral in the form of a fractional interest in an airport which you could never foreclose upon.

    As written it appears airports would be able to go into the real estate speculation business–purchasing land, building commercial structures and leasing them, IN DIRECT COMPETITION WITH THE PRIVATE SECTOR. One must remember that any building owned by the government is EXEMPT from taxes. While a city may charge rent for its airport buildings or land; schools, counties, and other taxing units are deprived of revenue from those government-owned structures.

    These amendments are nothing more than get-rich-quick schemes and are not good for the citizens–regardless of the revenue source. They are no doubt encouraged and appreciated by the lending institutions which will benefit from the interest on the unsecured bonds.

  2. Normally I would agree with Dale above, however the current 2/3 majority is a bit much to ask for in voter approval. A simple majority should suffice on projects over a pre-set amount, say $5 Million. Anything below that, or whatever number could be approved with a board approval. This is one reason these people were elected or appointed to these boards. It would require some of the board members to step up and make a decision. I served on a board and number of people couldn’t make a decision.

  3. I urge caution in forwarding a proposed constitutional amendment such as this. Judicial confirmation, instead of voter approval, should not be the preferred method of approving long term debt. When the will of voting taxpayers is ignored, there arises an ‘abuse of power’ issue. If the benefits of a project are compelling, the voters will approve it; if not, they’ll vote it down.