Study urges cargo airport tenant

HARRISBURG – An economic impact study on the proposed cargo airport near Hazleton recommends developer Gladstone Partners LP have a commitment from an anchor tenant before the state commits funding.

Results of the study were released Wednesday in Harrisburg.

The developers are asking for $250 million from the state to help fund the estimated $502 million cost of the airport development. The state’s participation, the study said, is necessary for the viability of the project.

The consultants recommended the developer provide an enforceable letter of commitment from an anchor tenant as protection for the state against the risk the funds would be spent before the developers obtained a commitment from the tenant.

No major shippers, such as FedEx, UPS or DHL are likely to move to the proposed airport, the study said. But Gladstone indicated it is in contact with a prospective partner it believes can persuade carriers to ship international cargo to the airport, which would lie in Luzerne and Schuylkill counties, the study added.

In his summary of the study, Jeffrey Sweeney, whose firm Martin Associates in Lancaster contributed to the study, said no successful all-cargo airport has been developed in the United States without any of the three major shippers.

“The developer is therefore suggesting a development model that is not impossible, but would be unlike any other all-cargo airport development in North America,” he said.

Gladstone had not fully reviewed the study and had no comment late Wednesday, said Catherine Shafer of CDS Creative Inc., the public relations firm for the developer.

The company underwent a change in ownership Tuesday when attorney Robert Powell of Butler Township said he sold his interest to his partner, attorney Gregory Zappala of the Pittsburgh area. Powell also sold his interest in two juvenile detention centers to Zappala, including one center in Pittston Township. A third participant, former Hazleton Mayor Michael Marsicano, placed his interest in a blind trust last year.

Neither Sweeney nor Jeffrey Breeden of RS&H consultants in Richmond, Va., would comment on the study presented to the state Legislative Budget and Finance Committee in Harrisburg. A third consultant, Michael Webber of Webber Air Cargo, Kansas City, Kan., also participated in the preparation of the study.

The committee voted to make the document public and tentatively set another presentation on the findings for June 26 in Hazleton at a yet to be determined location.

“It’s really up to other people to do what they will at this point,” he said.

Senators raised concerns

The study stemmed from a resolution introduced by state Sens. Lisa Baker, R-Lehman Township, and Raphael Musto, D-Pittston Township. The senators raised concerns about the state’s involvement and sought to substantiate the claims made by the developers that the project would create more than 4,500 jobs and contribute billions to the regional economy. The developers pitched the airport as an alternative to the congested East Coast gateways in the greater New York City area. They also said the airport would be the main component of more than $1 billion in development on land the developer owns.

A proponent of the project, state Rep. Todd Eachus, D-Butler Township, sought to have the state back $250 million in bonds to cover half of the construction costs. But before it received any state money, the senators wanted a number of questions answered, including what role Gladstone would play in the financing and long-term operations, and the impact of the project on infrastructure, schools, emergency services and health care.

Eachus said he was “heartened by the report,” especially the findings related to job creation, the economic output to the state and the amount of taxes to be paid the state and local governments.

“Why wouldn’t we deserve state funding?” he asked, when questioned about the $250 million in state money required to make the airport viable.

“We deserve in Northeastern Pennsylvania the same amount of money Philadelphia and Pittsburgh get” for capital budget projects like the new arena for the Pittsburgh Penguins hockey team, he said.

Eachus said his focus is on job creation and not the lack of interest in the project by any of the major shippers.

‘Who’s on the hook?’

But having no participation by the major shippers concerned committee member state Rep. Robert Godshall, R-Montgomery County.

Without them, he asked, how would the airport perform and when would the state recover its investment of $250 million?

The study concluded that if the airport were successful and able to handle an estimated 500,000 tons of freight in its 16th year of operation, the state would recoup its investment.

Over a 20-year period, the state would receive $334 million in taxes and local governments would receive $230 million in taxes. Using the half-million tonnage figure, the study further concluded the airport would create 5,548 jobs. The developer’s analysis cited the creation of 4,533 direct jobs, however. An additional 164,475 jobs would be created throughout the state and not necessarily in the Hazleton area, the study said.

The figure was higher than the developer’s estimate of 161,000 induced jobs. The output to the state, an estimated $30.1 billion, also topped the developer’s estimate of $17.1 billion.

Using the 500,000 tonnage figure, the study looked at various funding scenarios and arrived at corresponding financial outcomes.

Without debt service, the airport operates at a positive cash flow starting at $1.4 million and increasing to $27 million over a 20-year period. With state funding of $250 million and the developer providing $252 million in financing, the cash flow starts at $1.1 million and increases to $8.7 million by year 20. But if no public funds are appropriated for the project, the airport will have a negative cash flow over the same period and record a loss of $9.4 million in its 20th year.

“Given these conditions, it appears that the support of the Commonwealth is necessary in the viability of this project,” the study concluded. The state’s support would only be for the airport and not the development surrounding it, the consultants said. Gladstone plans to develop an estimated 3,500 acres.

Including the airport, the total cost of the project balloons to an estimated $1.2 billion. Under questioning from state Sen. Robert Wonderling, R-Montgomery County, consultant Breeden acknowledged that between $25 million and $35 million also would be required for improvement to Interstate 81.

That would be in addition to the $250 million that would be sought from the state.

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State funds sought

Senators raised concerns

‘Who’s on the hook?’

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