CHICAGO -- A Minnesota legislative panel yesterday cleared the way for the state and the Metropolitan Airports Commission to issue up to $699 million of bonds to assist Northwest Airlines expand its operations.
The Legislature's Commission on Planning and Fiscal Policy voted 11 to 7 in favor of allowing the airports commission -- the owner and operator of Minneapolis/St. Paul International Airport -- to issue up to $349 million of general obligation and lease-backed revenue bonds and loan the proceeds to Northwest.
Approval of the airports commission bonds was the last part of an economic development package negotiated between the airline and the administration of Gov. Arne Carlson in October.
Under the agreement, the state will issue up to $350 million of bonds to finance the construction of an airplane maintenance facility in Duluth and an engine repair facility in Hibbing, both for use by Northwest. Up to $175 million of the state bonds will carry the state's GO pledge, while the rest will be lease-backed revenue bonds.
The airports commission will issue up to $349 million of bonds -- $270 million of GO bonds and $79 million of lease-backed revenue bonds -- and loan the proceeds to Northwest.
Only Gov. Carlson needs to approve the state issue, and he has said for months that he will do so.
The issuance of the airports commission bonds was approved last month by the airport commission's members and the Iron Range Resource and Rehabilitation Board, leaving the legislative commission the last to give its stamp of approval to those bonds.
Financial assistance from both the state and the airports commission was cited by Northwest officials as a necessary part of its agreement to build the maintenance facilities in the state. Airline officials aid they would locate the facilities elsewhere unless that demand was met.
Both governments could issue bonds as early as January, officials have said. But it is still possible for issue could be delayed.
Peggy Willens, a fiscal analyst for the state Senate Finance Committee, said there were rumblings yesterday at the state capital in St. Paul that opponents of the Northwest package were preparing to challenge it in court.
Members of the main opposition group, the Committee to Stop the Loan, could not be reached for comment yesterday.
Final approval of the bond issues yesterday followed months of public discussion over using public financing to assist Northwest, one of the largest employers in the state and the main user of Minneapolis/St. Paul International Airport.
The original financing plan that was proposed in May was for the airports commission to issue $270 million of GO bonds and $120 million of lease-backed revenue bonds. But during negotiations with Northwest, airports commission staff members said they could not issue that many revenue bonds without reducing the coverage on the commission's $154 million of outstanding GO bonds. Doing so would have endangered its triple-A rating from Monday's Investors Service and Standard & Poor's Corp.
That move caused Northwest to break off talks with the state on Oct. 15. But bargaining resumed within a few days, and Gov. Arne Carlson persuaded the Iron Range Resource and Rehabilitation Board -- a state-created panel charged with promoting economic development in northeast Minnesota -- to consider participating in the financing by providing a letter-or-credit for additional coverage on the $79 million revenue bond issue.
Northwest official yesterday said they were pleased at the commission's actions.
"We wanted to expand in our home state," Northwest President John Dasburg said in a press release.
Officials from Moody's and Standard & Poor's could not be reached for comment on the bond package yesterday. Standard & Poor's has in recent months expressed concerns about Northwest's financial position and has said there are risks associated with the financings.