Costs of airport improvement plan under review as inflation pushes construction expenses higher
MICHAEL CRUMB Feb 24, 2022 | 8:27 pm
5 min read time1,122 wordsBusiness Record Insider, Transportation
The projected cost of improvements at the Des Moines International Airport has gone up and continues to be reviewed, and officials have begun a new strategy in hopes of securing state funding to help cover the costs of the project, which includes the construction of a new terminal building.
The airport has struggled with capacity to handle increased air travel, which hit record levels in Des Moines in 2019, and officials say a new terminal and related improvements are an integral component to continuing the economic development momentum the region has seen in recent years.
According to Kevin Foley, executive director of the Des Moines Airport Authority, growth in Central Iowa caused airline travel to exceed projections, hitting levels that were projected for 2027 in 2019.
“Passenger traffic projections that originally came out in the original plans were woefully short,” he said.
Passenger traffic at the airport is about 90% of 2019 levels, which is generating revenue that the airport can use to help cover some costs of the project, Foley said.
Preliminary travel numbers show 172,415 passengers passed through the gates at the Des Moines airport in January. That’s up from 89,575 in January 2021.
Foley said the estimated cost of the improvements has risen from around $500 million to about $575 million following an internal review because of the effects of inflation. That includes work that has already been completed, such as the first phase of the new entrance drive to the terminal.
The work that has been done was funded with cash reserves and some grant money, Foley said.
The initial estimated cost of a new terminal was about $260 million. Foley expects the airport will have to bond “to the limit,” to close the funding gap. The maximum the airport could bond is $70 million, he said.
To get a better idea of potential future costs, the airport authority has brought in consulting firm Anser Associates, which Foley said is a team composed of construction estimators, engineers, architects and other experts who have been through the process of building new airport terminals.
“Their first task was to go back to the program development document, which was completed in 2017-18, and update that to show the changes that have occurred as a result of the pandemic, as a result of technology that was brought on and as a result of inflation we are experiencing,” Foley said. “They’re in that process right now.”
He expects that review to be finished by April.
The airport will receive some federal funding from the American Rescue Plan Act, which designated $15 billion to be added to the federal airport improvement program. How much of that Des Moines will receive isn’t completely clear, Foley said.
The first year of the program, Des Moines will receive $5.4 million. Funding is based on enplanements, with the first two years using data from 2019. The third year, 2024, will use data from 2023, Foley said.
Funding formulas will not use data from 2020 and 2021 because of the big drops in air travel in the early months of the pandemic and the lower numbers as the industry recovered in 2021.
“If you want to multiply [$5.4 million] by five, it should be around $27 million, but even that’s not a guaranteed amount because it depends on what our 2023 enplanements are, but it should be in that area,” Foley said.
Foley said the airport has also approached the state for funding. The state has federal COVID-19 relief money it could tap into to help pay for airport improvements, and the money could be allocated directly by the governor without legislative approval, he said.
To increase the chance of securing some of the funding, airport officials have launched a new strategy to show support the project has among communities in Polk County and in communities and counties that are contiguous to Polk County.
“In having some preliminary discussions with the state, they said we need to know there is support and this support isn’t contingent upon being a regional authority, and you need to get this for us,” Foley said. “That’s the reason for this effort. We were asked to do that.”
So far, 15 communities have committed more than $28 million to the project, he said.
Most recently, the Polk County Board of Supervisors voted to contribute $10 million to the project. That follows an earlier $10 million commitment from the city of Des Moines.
Not everyone is on board.
The Jasper County Board of Supervisors recently voted against Foley’s request for $500,000.
Foley said the formula used to determine requests for funding is based on population, with per capita amounts starting at $50 for Des Moines, down to $10 for the smallest communities in the region.
While Des Moines and Polk County have each committed $10 million, others, such as Polk City ($49,160) and Windsor Heights ($48,090) have agreed to contribute much smaller amounts based on the per capita formula.
“We still have a few more communities and counties to talk to,” Foley said.
He is also reviewing qualifications of architectural firms in hopes of having one on board to begin the design phase early.
According to Foley, he has information from seven firms on his desk, and they will be reviewed by staff to narrow the list to three that will be interviewed.
Foley remains optimistic that the project will move forward not only on schedule but possibly early if the federal and state funding can be secured.
“The timeline, assuming we are successful in getting that additional funding, will actually speed up,” he said. “The original timeline was occupancy in 2028. This process speeds that up to 2026.”
That’s partly because American Rescue Plan Act funds require that they be spent by 2026.
“We can make that timeline, but that is why we are kind of speeding things up and bringing the architectural firm on now and starting design now,” Foley said.
The biggest concern moving forward is the continued effect inflation could have on the project, he said.
As an example, he cited a bid for the second and third phases of the entrance road project that came in $900,000 over estimates because of the increased cost of concrete.
“The inflationary period we are in is having an impact on everything we do, including construction costs. There’s certain aspects of construction that inflation is really hurting concerning budgets.”
The federal funding includes $1 billion for the development of airport terminals in cities the size of Des Moines. With 70 airports that size competing for a piece of that funding, competition will be stiff, Foley said.
“As inflation takes off, a billion dollars isn’t going to go very far,” he said.