Bond tied to airport fees •Study urges increase in landing fees to service bond

A financial analysis conducted by an Ohio-based consultancy firm revealed that the Commonwealth Ports Authority would have to raise the airline landing fee and facilities service charge by mid-1999 to be able to meet debt service of the $35 million 1998 revenue bonds.

The study which included projections in air traffic was conducted by Ricondo & Associates, Inc., in connection with the issuance of the CPA 1998 airport and seaport bonds.

Due to the significant decrease in traffic to the CNMI as a result of Asia’s financial crisis, “it is necessary to increase aviation fees and charges,” the study said. Airline cost per enplanement is estimated to increase to a high of $11.94 in fiscal year 2000 from $9.21 in fiscal year 1998 because of low projection of enplanements until the year 2000, increase in debt service and projected additional operating expenses.

According to the report, Japan Airlines has already pledged to support an increase in fees. Although other airlines have yet to formulate a position on the planned rate adjustment, officials believe that the increased in cost must remain reasonable and not adversely affect the traffic.

The ports authority has not raised its fees since 1987 but it has already carried out various improvement projects in its airports on Saipan, Rota and Tinian.

When it issued the 1998 bonds, CPA agreed to ensure the security of the bonds to the bondholders by ensuring that it would produce annual net revenues equal to the at least 125 percent of annual debt service.

According to the study, projected airline rates and charges together with other contracts with CPA are sufficient to ensure that all expenses of operation, maintenance, debt service and fund deposit requirements can be generated through reasonable user fees.

At least $4.2 million of the proceeds from seaport bonds was used to refund the 1997 airport revenue bonds and $3.9 million was directed to project reimbursement.

The remaining $7.3 million was used for new projects at the three airports.

Of this, some $5.2 million went to Saipan International Airport, $1.5 million to Rota International Airport and $6,000 to West Tinian Airport.

For fiscal year 1999, the airport’s budget was $9.7 million, more than 1 million lower compared to previous year’s appropriation. Most of the decrease can be attributed to lower staffing levels which results in less travel, lower insurance cost and salary expense.

Non-aviation revenues which include earnings from concessions, rental car contracts and parking, ground rentals, ground transportation, incinerator and interest income are expected to decline to $3.7 million for fiscal year 1999 from the $4.7 million in the fiscal year 1998.