With too-large debt overhang, T.F. Green expansion is unlikely

To the Editor: Perhaps the Providence Business News should put more business into its news (“Bad move by Warwick City Council on Green,” Dec. 12, 2011) and run the R.I. Airport Corporation’s “spreadsheet.” More

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LETTERS TO THE EDITOR

With too-large debt overhang, T.F. Green expansion is unlikely

Posted 12/26/11

To the Editor:

Perhaps the Providence Business News should put more business into its news (“Bad move by Warwick City Council on Green,” Dec. 12, 2011) and run the R.I. Airport Corporation’s “spreadsheet.”

The people of Warwick are becoming increasingly aware that RIAC is long on dreams and short on funding. It now spends almost half of its revenue on debt service, with rating agencies reminding it that it cannot borrow one dollar more without impacting its debt rating. Since RIAC is a state agency, it is prevented from executing a borrowing program that degrades its bond rating.

Fitch Ratings issued a warning of a potential downgrade to RIAC’s bond rating on Aug. 11, and its opinion included the following possible reason for a downgrade: “Additional leverage absent of any material improvement in the airport’s traffic base.”

The state’s credit-downgrading prohibition rule is administered by the Public Finance Management Board, chaired by the General Treasurer of Rhode Island. Public members of this board include a senior Rhode Island banker, a municipal finance director, two practicing CPAs, and two experienced investment advisers. This board meets quarterly to review debt ceiling problems and approve the publication of the Fiscal Year Report on Debt Management prepared by the General Treasurer.

All businesspeople, including the Finance Management Board members, understand this point: When a business borrows knowing that its bond rating will suffer, this kind of behavior looks like an act of desperation. That is why state agencies are prohibited from borrowing into a downgrade. Such borrowing could negatively impact the state’s credit rating as well.

Will passenger counts go up significantly at T.F. Green Airport in the near future and solve its Fitch ratings problem? Probably not. The airlines pay for runway improvements through increases in landing fee charges. RIAC increased its landing fees by almost 20 percent this past year. In response, USAirways cut its operations at Green by 20 percent in October. This means fewer flights and more use of turbo props and regional jets.

The more you increase landing fees, the fewer passenger seats and flights you will see operating out of Green. Is there any mystery to this? The end result is that passenger counts continue to decline at Green. The Fitch warning is real.

I don’t think any member of the Warwick City Council is in danger of losing the next election because he or she asked the FAA to review its own decision on an EIS paper developed by an outside consultant.

I do believe that City Council members would be held accountable if they flip-flop and allow RIAC to continue to threaten to destroy adjacent neighborhoods with no – absolutely no – funding to fuel the bulldozers.

Richard Langseth

Warwick

executive director of the Greenwich Bay Watershed Group and a former Republican candidate for mayor of Warwick.

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