Published in partnership with The Florida Times-Union.

The budget clash last summer between the Jacksonville City Council and the Jacksonville Aviation Authority might sway the willingness of investors to bankroll financing a new concourse at Jacksonville International Airport, several investment banks have told the authority.

Over the objections of aviation authority leaders, City Council added $13 million to this year’s budget for development of Cecil Airport on the Westside, which the authority owns and operates for aviation-related tenants such as Boeing and as a spaceport. To some financial analysts, the council muscling in a multimillion-dollar expense into the JAA budget calls into question the agency’s independence. 

The push and pull between the city and one of its so-called “independent authorities” — which also include agencies like JEA, the port and the Jacksonville Transportation Authority — has raised eyebrows on Wall Street before, where political interference in nuts-and-bolts spending decisions is often frowned on.

Aviation authority spokesman Greg Willis said the comments from the investment banks are a concern for the authority as it prepares to enter the bond market for expansion of Jacksonville International Airport.

“The banks raised the issue as a factor that investors or credit rating agencies may view as a risk,” Willis said. “If that were to be the case, it could cause a lower credit rating, higher interest rates or cause investors not to want to invest in the bonds.”

City Council member Nick Howland, who pushed hard for adding money to the authority’s budget for Cecil Airport, pointed to analysis from banks that said the authority’s cash on hand is among the highest in the industry.

He said comments raised by investment banks about budget conflict “are not concerning to me at all” because City Council, the state Legislature and the aviation authority are “marching in lockstep now.”

“Nor do they appear concerning to the underwriters who clearly agree with me and our state and federal elected officials that the airport has an overabundance of cash and that Cecil Field has incredible potential for aerospace economic growth,” Howland said.

City’s top lawyer cancelled contract with Lawson firm after memo

The aviation authority’s pursuit of $300 million in financing for building a third concourse that will add flights  at Jacksonville International Airport — the airport system’s biggest generator of revenue — is happening against a backdrop of City Council and state lawmakers calling for more investment by the aviation authority in Cecil Airport.

During the budget dispute last summer, a Tallahassee law firm hired by the aviation authority said in a Sept. 11 memo the authority would violate Federal Aviation Authority requirements if it agreed to use airport-generated revenue to renovate a hangar for a Florida State College at Jacksonville aviation training program that Howland sought to put at Cecil Airport.

The Lawson Huck Gonzalez firm memo went a step further by saying City Council had overstepped its legal authority by inserting $10 million for the hangar renovation and $3 million for other Cecil Airport-related development into the authority’s budget. The memo asserted City Council cannot tell the authority how to use its airport revenue.

General Counsel Michael Fackler, who heads the Office of General Counsel that oversees legal services for the consolidated city of Jacksonville, sharply disagreed with the Lawson memo. He told the aviation authority board on Sept. 29 that City Council absolutely has the legal authority to change the authority’s budget on a line-item basis.

Fackler then killed the Lawson firm’s contract on Oct. 6.

State Rep. Wyman Duggan, R-Jacksonville, meanwhile moved forward with legislation stating the aviation authority is responsible for economic development at Cecil Airport such as workforce development and job creation while also making Cecil Airport a national aerospace hub.

Aviation authority officials have said they are committed to bringing aviation and aerospace jobs at Cecil and have a record of doing that with projects such as Boeing’s expansion, a Hermeus testing facility and planned Otto Aviation manufacturing plant.

The state House voted 113-0 for Duggan’s legislation on Feb. 11, sending it to the Senate that still must vote on it for it to pass in the Legislature.

‘Moments of tension’ cited in investment bank’s review

Five of the nine investment banks that applied to help underwrite the $300 million bond issuance by JAA cited the budget conflict when they examined what kind of local issues might come up when rating agencies and investors assess JAA’s ability to repay its debt.

“Ongoing issues with City Council and local officials have raised concerns regarding potential diversion of airport generated revenues to non-airport purposes, which could affect bondholder security and JAA’s financial flexibility,” RBC Capital Markets wrote in its application to be an underwriter for the authority’s bond issuance.

BofA Securities pointed to legal and legislative impacts of ongoing talks with City Council “especially as it relates to the ability of JAA to manage its funding priorities.”

Piper Sandler said City Council “may become more interventionist in the authority’s business affairs” at budget approval time.

Samuel A. Ramirez & Co. wrote that potential redirection of money to Cecil Airport and the state legislation making the authority responsible for developing the airport into a hub for aerospace and related industry “could raise questions from rating agencies and investors.”

“On the other hand, there could be the opportunity to realize new revenues as the industry continues to develop,” Ramirez wrote.

Wells Fargo Bank said the authority has had “moments of tension and disagreement” with City Council but the creation of a joint committee of aviation authority board members and council members “signals a constructive shift toward collaboration.”

“Although JAA’s operational autonomy is safeguarded under Florida law, the City Council retains oversight authority and proposed charter amendments have the potential to impact budget decisions — either negatively or positively,” Wells Fargo wrote.

Wells Fargo wrote that development at Cecil Airport could benefit the authority by broadening its revenue base beyond passenger traffic and airline fees.

Four other investment banks did not mention the budget conflict in their overviews of the authority.

JP Morgan Securities, which the authority selected in December as the senior manager for bond underwriting services, said the aviation authority has “industry leading” levels of assets that can easily be used as cash.

“The authority has incredibly high levels of liquidity,” JP Morgan Securities said in highlighting the authority’s financial strengths.

JP Morgan said during the COVID-19 pandemic, the No.1 focus of airport investors and rating agencies was on airport liquidity because it “provided runway to a more normal operating environment.” In the 2024 fiscal year, the aviation authority had more than 1,700 days of cash for expenses “which is among the highest in the industry.”

The authority expects to go to the market in April and May for issuing the bonds. By then, rating agencies will have assigned scores indicating the level of risk for investors by looking at a wide range of factors covering trends in the airport industry as a whole and the Jacksonville Aviation Authority specifically.

Nate Monroe is the executive editor of The Tributary. He can be reached at nate.monroe@floridatrib.org.

David Bauerlein is a metro reporter for The Florida Times Union. He can be reached at dbauerlein@jacksonville.com.