CHICAGO -- United Airlines on Monday received the green light for the issuance of up to $850 million of special facility revenue bonds to complete an airplane maintenance facility in Indianapolis.
Meanwhile, Indianapolis has identified funds to make the first debt service payment on bonds that it issued the city 1991 for the facility.
On Monday, the Indianapolis Airport Authority Board authorized issuing $850 million of tax-exempt bonds, starting with $200 million of bonds to be sold within the next two months, according to Alan Boone, the authority's managing director of finance.
United had requested the bond issuance to fund continuing construction of the maintenance facility for its Boeing 737 and 757 aircraft on a 300-acre site on the northwest side of the Indianapolis airport.
Boone said the bonds will be issued through the authority, but that United is solely responsible for paying debt service through lease payments.
Officials from United did not return phone calls.
The $850 million of bonds should be the last of the debt issuance needed to finish the facility, Boone said.
Indianapolis, Indiana, and Hendricks County have already issued about $293 million of tax-exempt debt for the project.
Earlier this year, Indianapolis Mayor Stephen Goldsmith raised some concerns about finding revenues to pay debt service on $140 million of lease revenue bonds the city issued through the Indianapolis Local Public Improvement Bond Bank for the airline maintenance facility in 199t.
Goldsmith in February was pessimistic about paying debt service with pledged revenues from a county option income tax because the city has been using most of that revenue for its police and fire department budgets.
On Monday, Goldsmith called for using a $15 million one-time state payment of the income tax revenues to cover the 1995 debt service payment, as well as half of the 1996 debt service payment, according to Jim Snyder, special counsel to the mayor.
The use of the funds was outlined in Goldsmith's $471 million proposed general fund budget for the 1995 fiscal year, which begins Jan. 1. The $15 million payment results from a 50% cut in the number of months the state holds income tax collections for the city-county government. Snyder said that instead of holding the money for six months, the state will now only hold the money for three months.
"It's a one-time, $15 million shot in the arm," Snyder said.
The money will cover the 1995 $9.5 million debt service payment on the bonds and about half of the $12 million payment due in 1996, Snyder said.
For future debt service payments, Indianapolis is hoping to increase revenue collections from a tax increment financing district around the airport, he added.
"We'll continue to grow the taxes from the property surrounding the airport in the TIF district," Snyder said. "There is some vacant land around the airport we would like to develop."
No matter what revenues the city uses, bondholders will still have a first lien on the county option income tax revenues, which provide five times debt service coverage on the bonds, he said.
In March, United Airlines, which has a 40-year lease with the airport authority, opened a portion of the first phase of the maintenance facility, which included a hangar and a central utilities plant. The rest of phase one, which includes a central building, more aircraft bays, and other facilities, is scheduled to be completed next year. Construction of the facility, which began in August 1992, is scheduled to last 12 years.
Snyder said that in addition to the upcoming bond issue by United, Federal Express also plans a $210 million tax-exempt special facility revenue bond issue through the airport authority to expand its operations at the Indianapolis airport.