DALLAS -- Colorado lawmakers today begin debating a $200 million-plus package of incentives that could get United Airlines to commit to the new Denver International Airport.

While the proposed incentives face an uncertain vote in the General Assembly, many agree that a rich enough package of tax breaks could bolster investor confidence in the near-junk rated bonds and end local efforts to stop the $2.4 billion project.

At the same time, some in the bond industry speculate that Denver's failure to sign an agreement with United may only stir more uncertainty about the future of the nation's largest-ever new airport project.

"They've really gone after United with a financial package that looks like a last great shot at a deal," said an investment banker, who declined to be identified. "If they win, great. But if they lose, then what happens?"

While Gov. Roy Romer, Denver officials, and some Colorado business leaders have lobbied for the plan, the legislature could vote either way in this week's special session called to decide the incentives package.

"Right not, there are a lot of people sitting on the fence," said Phil Ross, and aide to House Speaker Chuck Berry, R-Colorado Springs. "I haven't heard anyone, not even the critics, who don't want United here."

However, he said House Majority Leader Scott McInnis, R-Glenwood, has suggested that if the state is to provide such large incentives, then lawmakers should creat a new authority to manage the airport.

The airport is currently financed and operated by Denver. Gennifer P. Sussman, the project's finance director, declined to comment on that possibility saying, "I'm not familiar with it."

The proposal would provide an estimated $200 million to $300 million in state tax incentives for United to locate a proposed 5,000 job maintenance facility in Denver.

However, that plan suffered a setback late yesterday when Colorado Attorney General Gale Norton cited seven areas where the draft proposal might violate the state constitution.

For instance, she said because the incentives call for possible tax refunds to United over 30 years, it would create a debt obligation -- which is consititutionally prohibited.

Ms. Norton told reporters that the problem areas could be resolved while still accomplishing the same goal.

Even though the incentives apply to the maintenance facility, the city and airline officials have said any pact with Denver will include a commitment to the new airport.

United has rejected a long-term lease at the new airport, which is to open in 1994, because of concerns over operating costs. The company estimates those costs could be three times higher than at Stapleton International Airport.

The proposed incentives, coupled with an estimated $150 million-plus of city proposals, are designed to offset United's cost of doing business in Denver.

The lack of an agreement with United was cited this spring when Standard & Poor's Corp. downgraded the project to BBB-minus, the lowest rating ever for a major airport credit. Moody's Investors Service rates the project Conditional Baal, while Fitch Investors Service assigns a BBB rating.

So if United signs on, could the airport bonds be upgraded?

"We will be going back to the rating agencies this fall to discuss our next fixed-rate issue," said Ms. Sussman. "We'll be discussing [the rating' with them, but I wouldn't really want to speculate at this point."

The airport has scheduled an October sale for another $200 million of fixed-rate debt. Denver has already sold $1.4 billion of bonds for the project. Another $100 million of variable rate debt is scheduled for sale the week of June 17.

"It's pretty clear that if we had a deal with United we will be reviewing the size of our [future] issues," she said.

But before that happens, the legislature must adopt the package of incentives. Rural lawmakers are expected to oppose the proposal, to be introduced at 10 a.m. today, mountain standard time, because of its long-term costs to the state treasury.

The legislative economist projected Colorado would spend $117 million more than it would benefit from the project over 30 years.

"Some people have referred to it as corporate welfare," said Mr. Ross.

While the city has refused to detail their incentives package, lawmakers told local newspapers last week that the Denver measures would include exemptions from local taxes and a 75% credit to United for six years against airport charges, including landing fees.

However, Ms. Sussman denied that hte city's own incentives include such credits that could affect revenue sources that will pay debt service.

One expert in airport financings said such fee breaks would have to be handed out sparingly.

"If they give these kinds of breaks to one airline, then all of them are going to ask for them," said the investment banker. "The city can either give them the same treatment or tell them to get lost."

An agreement with United could also end a campaign by airport critics to call a referendum to stop the project.

"We are going to watch and wait," said Miller Hudson, a member of a committee seeking a citywide referendum that could stop the project. "If they pass this, I'm certainly going to withdraw my efforts for a petition."

Critics of the project were instrumental in convincing the General Accounting Office to study the feasibility of the airport. Last month, the GAO said it would review the project's finances.

Mr. Hudson and others have opposed the project because they believe it will not be self-supporting and could require local taxes to pay off the 30-year bonds.

However, he said if United backed the project -- as the top carrier at Stapleton -- all that could change, adding. "We would just grit our teeth and hope this thing works."

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