Why the Salt Lake City airport is seeking up to $600M in new bonds this year

Work began at the new Salt Lake City International Airport in 2014, six years before the facility was functional in its initial stage.

But so much has changed over the past decade, and what city officials originally had in mind for the airport isn't exactly what they expect the airport to look like when the first four phases are complete in 2027, says Bill Wyatt, the airport's executive director. The current estimate is that the entire cost of the airport will reach about $5.14 billion by that point.

“It's a 13-year capital construction project that has seen several scope changes, which is basically an addition to the work, etc. That accounts for an increase of budget, which accounts for our continuing need to finance the program,” he told the Salt Lake City Council Tuesday.

So, as the airport continues to expand, executives are looking for new funds to help with all the new adjustments associated with its sudden growth, especially as they find themselves running out of money before they can reach what’s expected in the next four years.

They are asking for the Salt Lake City Council to approve a resolution that would authorize the issuance of up to $600 million in bonds, though they plan to sell a little over $450 million in debt. This would help fund the airport’s ongoing projects that are expected to go online in the next year.

Of course, it all depends on how the market is doing.

The airport’s incoming growth

The Salt Lake City International Airport is already expanding this year, as the first five gates of the new Concourse A-East building are slated to open next week. The remaining 17 gates are still on schedule to open in October. These are the first 22 of 48 new gates expected to open by the end of 2027, effectively doubling the current number of gates at the airport.

That’s where bonds come into play. Bonds are issued by governments to help pay for massive projects, generating money off the bat before those bonds are repaid to creditors either through taxes or other sources of income.

In this case, residents won't bear the cost of the bond, unlike the $85 million general obligation bond that Salt Lake City residents passed in November, according to the Salt Lake City Department of Airports. The airport plans to pay the bond off through various airport revenues, such as landing fees, terminal rentals and other fees that airlines pay the airport, as well as other revenue collected by the airport, so it doesn’t impact the city’s general fund.

Salt Lake City previously approved the issuance of $900 million in par bonds in 2021, which helped fund the ongoing construction projects for about 21 months, but the airport has now spent all of the bond proceeds, said Brian Butler, chief financial officer at the airport.

They’ll need the bonds to keep up with the current timeline.

"We’re coming back to you to ... get another year’s worth of construction costs, and these are really to finish out those gates on Concourse A-East, as well as the tunnel and those first four gates up there on Concourse B," Butler told the City Council.

A new bond request

While airport officials are asking to receive clearance of up to $600 million in new bonds, the current plan calls for nearly $456.6 million in new debt. This would generate about $400 million in new funds for construction, while the rest goes toward fees and other costs associated with issuing the bonds.

Wyatt explained that the airport’s bonds are specifically timed to help provide financial resources for construction when the money is needed, typically using the funds “within the scope of a year.” It’s a big reason why airport executives anticipate the bonds will only help finish out the projects expected to open by the end of 2024.

This particular bond request is also a bit smaller than previous bonds because of higher interest rates at the moment, he added. The current interest rate is nearly double the rate the city received two years ago, so the plan is to issue bonds that can be refinanced after about a decade and save long-term costs.

Butler said there will be a 30-day “no contest period,” where residents can submit comments either for or against the plan to add more debt, once the City Council votes on the measure. Airport executives plan to meet with rating agencies in June before any bonds are issued — if the council approves the plan.

The airport plans to have the bonds issued by the end of July unless the interest rate soars past 6%.

“If the market just goes crazy, we’re not going to issue debt,” he said. “If we get to the bond market and rates are above 6%, we’ll kill the deal. We will just not issue (and) we'll have to come back to the drawing board (to) seek your approval.”

The City Council is tentatively scheduled to vote on a resolution during its May 16 meeting, while also holding a public hearing on the matter on June 6.