SAN FRANCISCO -- California municipal analysts on Friday received a preview of some major transportation-related deals coming to market in future years, but an out-of-state issuer, the Denver International Airport, captured much attention as well.
The all-day spring meeting of the California Society of Municipal Analysts featured an overview of financing plans for the $1.8 billion Alameda Corridor, which is designed to improved railroad and highway access from downtown Los Angeles to the ports of Long Beach and Los Angeles. Analysts also heard from the San Francisco Airport Department, which plans to spend $1.2 billion on major capital projects next year and $800 million in 1996.
Although analysts had some question about the various projects, it was obvious the Denver airport situation was on the minds of many.
Frank Ward, deputy director of government affairs and public relations at the airport attempted to soothe some of the concern about the delayed opening.
"This project is going to happen," Ward said, adding that "the term ~indefinite delay' is wrong [because] we're not looking at three, four, or five months" before the new airport opens.
Last week, city officials delayed opening Denver International pending the successful operation of the troubled automated baggage system.
The latest delay prompted renewed discussion of the rating and price outlook for the new airport's debt.
Moody's Investors Service last week lowered its ratings to conditional Baa from conditional Baa1. Fitch Investors Service placed $2.7 billion of Denver airport revenue debt on Fitch Alert with negative implications, and Standard & Poor's Corp. is reviewing its BBB rating, on CreditWatch with negative implications, for a potential downgrade to junk status.
The new airport bonds are secured by landing fees and other revenue. They are not backed by Denver or Colorado.
Louise F. Stoll, assistant secretary of the U.S. Department of Transportation, was asked about the federal government's support of the Denver airport, following her morning keynote address.
"I think we see it as a fait accompli," Stoll said. At this point "it's not a matter of support or non-support -- it's a done deal, it's behind us," she said.
When pressed further on how the Transportation Department might look on a request for additional support, Stoll responded: "Probably not favorably."
In a later panel, Ward seemed indirectly to dispel the notion that such help would be needed.
"We're not in trouble," he said, pointing to the city's "proven track record" in operating Stapleton International and overall stability over the years.
On other topics, Stoll noted a continuing problem with an infrastructure financing deficit for highways.
During a question-and-answer session, Stoll was asked what could be done about persistent environmental litigation that can delay transportation projects and raise added uncertainty for investors.
"I can't give you a great deal of encouragement," she said, especially when one arm of government -- the Environmental Protection Agency -- occasionally will "cheer on lawsuits" in which it sees merit.
Stoll also was questioned about "frivolous" lawsuits, but she said that there can only be a limited response when "we live in a society where that is permitted."
Regarding other major projects, John L. Martin, deputy director of airport business and finance for the San Francisco Airport Department, outlined reasons why analysts can find comfort in his airport's ambitious $2.4 billion capital improvement plan, to be funded over the next three years.
Investors should look at the airport's track record, which includes the on-time and under-budget performance for work completed in 1987, Martin said. On the revenue side, Martin said the airport has attained the financial capacity to undertake a major improvement program.
Various officials described for the analysts plans for the Alameda Corridor project in Los Angeles, which will probably entail more than $600 million of bond sales.
"The project has a tremendous sense of national scope," said James Preusch, chief financial officer of the Port of Los Angeles.
Improved rail and highway operations stemming from the project will benefit the economy nationwide, Preusch said. About 40% of the Los Angeles and Long Beach port container traffic moves by rail to points across the nation, and the figure is expected to grow to 50% within the next decade.
Projections show the growth is clearly coming over the next 25 years, Preusch said.
Although many parties have agreed to the corridor concept, one railroad, Union Pacific, is still balking. "We have not found the right catalyst to get negotiations moving again," Preusch said.
Thomas Nolan, a director at Standard & Poor's Corp., said the greatest funding challenge may be $700 million of proposed federal funding for the corridor project. The timely release of any approved funding will be one factor for analysts to examine, he said.