Branson has no risk if airport fails or does it?

When the announcement was made that AirTran Airline would be ceasing its direct Milwaukee Branson flight less than three weeks after its initiation the reaction within the community was mixed. Some had the “I told you so attitude,” some the “I don’t care attitude” and still others the “We’re getting another flight attitude.”

Some were concerned that if this was the harbinger of what is to come for the airport, that the city of Branson or Taney County could be liable for all or a portion of the airports $150 million in private debt financing. For what it matters, based on the public information that is available, the Ole Seagull believes there is no reasonable way that either the City of Branson or Taney County has any legal obligation to repay any of the private $150 million in debt used to build the airport.

The private investors who invested the $150 million are the ones who stand to lose their investment if the airport operation doesn’t go as planned. A July 2007 Bloomberg.Com report said, “The Branson Regional Airport Transportation Development District (BRATDD) plans to sell $117 million of high-risk, high-yield bonds to finance a new privately developed airport near a tourist area known for its country music and live entertainment.” It continued, “The Branson airport deal comprises unrated securities maturing from 2013 through 2037 that are expected to have a top yield of about 6.5 percent, according to the bond offering documents. Citigroup will underwrite the deal.”

According to the May 14 and 16, 2007 records of the Taney County Commission, Taney County is leasing the land the airport is on to the BRATDD and the BRATDD was going to issue up to $150 million in revenue bonds to build the airport. The Notice of the Public Hearing said, “The bonds will be revenue obligations of the District [BRATDD], payable solely from revenues derived by the District from lease payments made under the operating lease to the Company for the Airport.”

There is a misconception that the city of Branson is responsible for paying $2 million per year to the airport. The reality is that under an agreement penned with the airport developers by the city administration in power prior to the 2007 elections, the city is obligated to pay the airport $8.24 per passenger that disembarks at the Branson Airport that did not originally board in Branson. There is a $2 million dollar per year cap on the payments. Although not limited to first time visitors to Branson, the payment is limited to passengers arriving at the airport. The lower the number of qualified passengers arriving at the airport the less the city pays. Zero passengers equal zero payment.

In the opinion of an Ole Seagull, although the citizens of the City of Branson and Taney County should be pretty well insulated from any direct legal liability should the airport fail that might not be the case for those who purchased the reported high-risk, high-yield, and unrated bonds. They should hope that passenger research and estimates used to forecast revenues are more accurate for other areas than they were for the Milwaukee Market.

On the other hand, our community and citizens do have a vested interest. If the airport fails what does that do to the reputation of the Branson Area in terms of economic development etc? Can any reasonable person really believe that the new lower air fare rates out of Springfield either would have happened in the first place or will be maintained without a viable Branson Airport? “Ah Seagull, what if things went south for the airport, is there a possibility of a “bailout?” Now how could an Ole Seagull know the answer to that one?

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