Unusual Financing Plan Keeps Denver Airport Rail Link on Track
The $2 billion project, called Eagle P3, is expected to be completed by 2016. It adds a heavier commuter rail line to Denver's existing light rail system. It's also the first phase of a much larger regional transportation expansion plan called FasTracks, which will extend light rail and bus service deep into Denver's suburbs, and build a new transportation hub next to the city's historic Union Station.
Eagle P3 is expected to create around 5,000 jobs per year in 2012 and 2013 once it's fully under way. The project's method of financing is unprecedented in the United States: It uses both federal loans and private investment, following years of proposals, development and planning.
(This computer-generated illustration above, provided by architect Santiago Calatrava, depicts the planned airport expansion, which will include a hotel, the rail station and an open-air plaza.)
Transferring Some Risk to the Private Sector
"We had a ballot measure in 2004 which authorized a sales tax sales increase," says project director Brian Middleton, "and it [is] all due to be finished in 2017, so we need to be getting on with it. We're expecting to get a full funding grant agreement from the Federal Transit Administration. We are also using the sales tax, and we have got $450 million of private debt and equity to support the project as well. It's a combined funding and financing model -- not unusual elsewhere in the world, but this is unique in the transit environment here in the U.S."
"In capital cost savings, we've saved about $300 million," he says. "So we're actually taking advantage of a very good bidding environment, because lots of people are hungry for work. We're able to get better prices than we would have, if we waited a couple of years."
The Eagle P3 bonds were issued last month and given moderate credit ratings by Moody's and Fitch, but that apparently hasn't affected their popularity. "They were heavily oversubscribed," says Middleton. "We actually got a better rate than was anticipated in terms of the interest that was applied to them."
Improving a Major Business Hub
Just 15 years after its official opening, Denver International is the fifth-busiest airport in the U.S. and 10th busiest in the world. And it has cried out for a dedicated rail link to the city.
"I always tell people, don't view the airport as a place where you fly in and out of, view it as an economic development project," says Dr. Robert McGowan, professor of management at the University of Denver's Daniels College of Business.
He applauds the "creative mechanisms" behind the Eagle P3 financing, and the fact that the project is finally under way. "The bottom line to me is, even if the economic timing's not right ... [commuter] rail is going to have to go out to [Denver International]," he says. "The question is, do we do it now or wait till later. If we wait till later, the costs on a project of this magnitude always go up."