CPA continues to argue on fees hike

Commonwealth Ports Authority executive director Carlos H. Salas has maintained that the Legislature would have to appropriate financial support to the agency to avoid any interruption in its airport services if it does not push through with the planned rate increases.

In a speech before Pacific Aviation Directors workshop in Honolulu, Salas said the planned rate hike has become “unavoidable” to cover operating expenses and debt service payments despite strong opposition from the public and the private sector.

But Gov. Pedro P. Tenorio has ruled out any bailout for the financially troubled ports authority since the executive branch could hardly raise the $5 million to $6 million payroll requirement for the more than 4,000 government employees brought about by shrinking revenues.

With the deepening financial crisis in the ports authority, management has carried out various cost-cutting measures to survive since last year. In 1998, CPA was able to reduce its operating expenses by 15 percent and reduce this year’s budget by 11 percent.

Due to declining revenue, the ports authority will aim for a 15 percent cut in salaries and benefits for fiscal year 2000 and an additional 15 percent in 2001.

As a result of the downtrend in visitor arrivals, CPA reported a 30 percent decline in passenger enplanement in fiscal year 1998 and another 25 percent drop in the first quarter of fiscal year 1999.

This led the ports authority to incur some $4.3 million in losses in 1998 and a net loss of $1 million for the first quarter of fiscal year 1999, surpassing even the most stringent cost cutting efforts.

Salas said the ports authority now faces the monumental task of meeting debt service on the $20 million in airport revenue bonds that were issued in 1998 to finish on-going projects and refinance old bonds at a lower interest rate.

Board chairman Roman S. Palacios has said CPA is looking at reducing the working hours of employees from 40 to 32 hours per week instead of implementing a mass layoff.

The raising of airport fees was one of the conditions imposed by the rating agencies — Fitch IBCA and Standard & Poor’s — before these can provide a rating to the airport bonds. Without any rating before March 1999, the interest rate will jump from 6.25 percent to 6.70 percent.

At the same time, the airport financial consultant Ricondo & Associates has projected a mere 4.5 percent growth for the aviation division of the ports authority due to the effects of the Asian recession.

The same study said this would necessitate a 39 percent increase in the passenger facility charge from $5.79 to $8.00 per passenger and a 65 percent hike in landing fee from $0.85 to $1.40.