DALLAS -- The General Accounting Office yesterday said the financial assumptions behind the Denver International airport project were reasonable, but it warned that cost overruns and other unforeseen factors could affect the city's ability to meet its debt service.
The GAO also estimated the total cost of the airport at nearly $4 billion, while city officials says the near-junk-rated project will cost $2.6 billion to build.
"The probability is low that the airpor will be unable to generate sufficient revenues to meet operating expenses and service its debt," the agency said in an executive summary released yesterday. "Nevertheless, the possibility of default always exists and would become more likely if several adverse conditions ... were to occur."
The GAO said such conditions would include cost overruns, schedule slippages, the loss of a hubbing carrier, and a shortfall in traffic projections.
The report comes as Denver prepares to sell as much as $500 million in new fixed-rate debt the week of Oct. 9. The city has already sold $1.5 billion of debt, which is rated conditional Baal by Moody's Investors Service, BBB by Fitch Investors Service, and BBB-minus by Standard & Poor's Corp.
Project officials could not be reached for comment on the report, which was made public late yesterday. A copy of the complete report was not available at press time.
Rep. David Skaggs, D-Colo., said in a statement yesterday that the report clears the final opposition to an estimated $615 million in federal funding for the project.
"As we'd hoped and expected, the GAO gave the new Denver airport a clean bill of health," he said. "There can be no questions after this thorough and unbiased review that the new airport is a solid project -- something we've said all along."
Rep. Frank Wolf, R-Va., one of two congressmen to seek the study, said in a letter to the Colorado delegation that he would not oppose federal funding for the project.
"While the GAO's report does sound some cautionary notes, the document does not outline any major concerns with this project," he said.
Critics of the project had requested an independent assessment by the GAO, the investigate arm of Congress, to resolve questions over the financing, the safety of the new airport site, construction plans, and the capacity of the airport.
In its summary, the GAO noted, "The financial viability of the new airport is the most problematic of the four issues raised."
However, the agency said that its outside consultants had determined "the probability was very low that the airport would even dip into the reserve account that is maintained to ensure debt coverage."
Further, the GAO said that bond analysts concluded that while the project is subject to more uncertainty than most airports "the risk associated with the bonds is still acceptable for most investors."
