CHICAGO -- United Airlines yesterday signed an agreement with state and local officials in Indiana that will lead to the issuance of about $1 billion of bonds over the next three years to build a maintenance facility for the airline.
The pact provides for the state, Indianapolis Airport Authority, Indianapolis, and Hendricks County to help pay for building the facility at Indianapolis International Airport.
Under the agreement, the airport authority will issue approximately $700 million of special facility revenue bonds secured by annual lease payments from United, according to Dennis Roseborough, an authority spokesman. The agreement also allows for more issuance as needed to complete the project.
Mr. Roseborough added that United will decide exactly how to structure the airport authority bonds.
"We'll sells our bonds when United indicates to us that they need the funds," he said. "It will be up to them to decide on the number of bond sales and how they're going to be sold."
United officials familiar with the financing plans could not be reached for comment yesterday.
The balance of the funds needed to build the facility will be provided by a $291 million incentive package funded by the state, Indianapolis, and Hendricks County.
Hendricks County borders the site where the facility will be built at Indianapolis International Airport.
The state will finance $171.5 million of the incentive package, comprising a $15.5 million cash grant from a state economic development fund and a $156 million bond issue by the Indiana Transportation Finance Authority, according to Mark Moore, deputy state budget director.
Mr. Moore said the bonds will be serviced by biennial appropriations of the state General Assembly.
Jan Funk, executive director of the transportation finance authority, explained that the deal probably would be negotiated but that the process for selecting underwriters is net yet decided. She added that the bonds may be issued in January.
Indianapolis will provide $111.5 million of the incentive package through a bond issue by the Indianapolis Local Public Improvement Bond Bank. Fred Armstrong, the bond bank's executive director, said plans are to service the bonds with a Marion County income tax, which raises approximately $63 million a year.
Indianapolis and Marion County have operated as a unified form of government since 1970.
The City-County Council is expected to vote on dedicating the income tax for debt service on the bonds at a Dec. 9 meeting. Mr. Armstrong added that all 29 members of the council have signed on as co-sponsors of the ordinance.
Mr. Armstrong explained that the bond bank probably will sell $140 million of bonds in December, with $111.5 million of the proceeds going to United and the rest toward the cost of issuance and a reserve fund to provide the first two years of debt service payments.
During the two years that the reserve fund will be used to service the bonds, the City-County Council might approve other revenues for debt service so that the income tax revenues could be used for other purposes, Mr. Armstrong said.
He added that he will recommend that the bond bank board of directors select an underwriting team for the issue led by Lazard Freres & Co. as senior manager. Co-managers on the issue would be: Merrill Lynch & Co.; Bear, Stearns & Co.; Bank One, Indianapolis, N.A.; City Securities Corp.; INB National Bank; Merchants National Bank & Trust Co.; Raffensperger, Hughes & Co., Inc.; and Traub and Co.
The remaining $8 million of the incentive package will be provided by Hendricks County. County officials have said they plan to provide their share by issuing a revenue bond backed by the county's Economic Development Income Tax.
The United maintenance facility has been described by Indiana officials as the largest economic development project in the United States. When completed, it will employ as many as 7,000 people earning annual average salaries of $45,000, according to a United press release.
United tentatively selected Indianapolis as the location for the new facility on Oct. 23. The three other finalists for the facility were Denver, Louisville, Ky., and Oklahoma City.