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Longer runway expenses uncertain

February 18, 2004|by TARA REILLY

tarar@herald-mail.com

Washington County might have to pay between $4.7 million and $14.4 million in interest to extend the runway at Hagerstown Regional Airport, finance officials said Tuesday.

The amount of interest would depend on what the rates are at the time the county issues bonds to pay for some of the approximately $60.2 million project, the term of the bonds and how quickly the Federal Aviation Administration reimburses the county for most of the project's cost, Director of Budget and Finance Debra Bastian and Lester Guthorn, the county's financial consultant, told the County Commissioners.

As of now, the county must finance approximately $18.8 million of the project's cost, because the time frame in which the extension must be completed is different than the period in which the FAA plans to reimburse the county, according to a county document.

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The project must be completed in about four years to meet new federal regulations on runway length, but the FAA isn't planning to pay its $47 million share of the project for 10 years.

If the FAA decides to repay the county by the time the project must be completed, the county would not have to pay interest. Or, if the FAA reimburses the county in fewer than 10 years, the interest amount would be lower, Guthorn and Bastian said.

"There's no guarantee we're going to have to pay all that," Commissioner James F. Kercheval said of the projected millions in interest costs.

Bastian said the county has received no indication from the FAA that it would be willing to reimburse the county more quickly.

The county plans to issue bonds so it can complete by 2007 the project to extend the runway from 5,450 feet to 7,000 feet.

"This is a cash flow issue," Guthorn said. "You have to have sufficient funds on hand to complete the project."

Assuming a 6 percent interest rate, the county would have to pay $4.7 million in interest on eight-year bonds, $7.7 million in interest on 10-year bonds and $14.4 million in interest on 12-year bonds.

Guthorn called the 6 percent interest rate a "worst-case scenario."

Bastian said it's possible the state would help the county pay the interest costs.

The commissioners will decide which financing package to go with late in fiscal year 2005, which would be November or December of this calendar year. Bonds probably would be issued in early 2006, according to a county document.

The financing costs would be in addition to the county's $2.6 million share of construction costs. The state will match the $2.6 million and has agreed to pay an additional $8 million toward the project.

The commissioners approved the runway extension in May 2003. Commissioners Vice President William J. Wivell and Commissioner John C. Munson opposed the project. They questioned whether the county could afford the extension and whether it was necessary.

Commissioners President Gregory I. Snook and commissioners James F. Kercheval and Doris J. Nipps supported the project, saying it would give Washington County an economic boost.

Airport officials have said a longer runway will allow larger jets to land, making Washington County a more attractive place for businesses to create high-tech, high-paying jobs.

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