Iowa county to take up GO bond referendum for Des Moines airport project

Officials in Polk County, Iowa, will decide later this month whether to place a referendum on the Nov. 7 ballot seeking voter approval for the issuance of up to $350 million of general obligation bonds for a terminal project at the Des Moines International Airport. 

The Des Moines Airport Authority, which can issue debt on its own, but has no bonds outstanding, wants to take advantage of the county’s triple-A ratings to lower borrowing costs.

Kevin Foley, the airport authority’s executive director, told the Polk County Board of Supervisors Tuesday the county’s issuance of GO bonds would save an estimated $76 million over the life of the debt. Bond proceeds would be loaned to the authority, which would be solely responsible for principal and interest payments. 

“This plan provides the cheapest funding for the airport terminal project at no cost to the taxpayers,” Foley said.

Inflation and high interest rates, he noted, are pressuring funding for the $445 million, first phase of the project to build a terminal that would increase gate capacity.

Most larger airports typically finance projects with general airport revenue bonds and only a few have access to GO bonds. The Metropolitan Airports Commission, which operates Minneapolis-St. Paul International Airport, can issue a limited amount of GO revenue bonds that are paid with airport revenue and backed by the authority’s ability to levy taxes on the assessed valuation in the seven-county metropolitan area.

The Des Moines Airport Authority concluded revenue bonds issued under its own ratings or financing the project through a public-private partnership would cost more, Brian Mulcahy, its assistant executive director, told the county board during a presentation last week.

The authority’s previous issuance in 2012 of revenue refunding capital loan notes, which were redeemed last year, were rated A2 by Moody’s Investors Service.

County officials, who are scheduled to vote on the referendum Sept. 19, were warned by Piper Sandler, which prepared a report, last week the sizable debt issuance for the airport could result in a one- or two-notch rating downgrade. 

Polk County had $212 million of GO bonds outstanding as of June 30, 2022, and its unused debt capacity under a constitutional limit was $1.9 billion, according to the county’s fiscal 2022 annual comprehensive financial report.

While some county officials last week expressed support for the bond plan, citing the airport’s importance to the local economy, they raised the possibility of having county representation on the airport’s board. 

Appointments of city residents to the authority’s five-member board are made by Des Moines’ mayor and approved by the city council. The city transferred control of the airport to the authority in 2011, while retaining ownership of airport land, which was leased to the authority for 99 years. 

Other funding sources for the terminal project include federal, state, and local grants, airport authority reserves, and passenger facility charges, according to Mulcahy’s presentation, which indicated an initial approximately $100 million of GO bonds could be sold next summer.

Passenger traffic at the airport, where six carriers, including American Airlines, Delta, and United, provide service, has surpassed pre-pandemic levels.

“When we look at 2023, passenger traffic … year to date is 3.8% higher than it was in 2019,” Foley said.