Economics of Airport Development

by Rudy Matthias 30.NOV.07

Undoubtedly, many persons would have missed Prime Minister Dr. The Honourable Ralph Gonsalves’s speech on Friday, 23rd November, when he received, from His Excellency, Ambassador Jack Cheng, US$2.5 million dollars, part of the funds promised by Taiwan for the Terminal Building, Control Tower, Roads and Other Support Services components of the Argyle International Airport project.{{more}} Taiwan’s total contribution to the project is US$30 million: US$20 million as grant funds and US$10 million as soft loan. In his acceptance speech, Dr Gonsalves presented an update on the airport project. I represent in this column, the main points of the speech presented under the various headings.

Designs and earthworks

The team of Cuban/Venezuelan engineers and technicians have now completed their work on the final designs for the airport and are due to make a presentation to the IADC. Officials from the IADC will be visiting Cuba in mid-December to discuss these designs, among other things. The designs will be used mainly to guide the earthworks, which are scheduled to begin by year end 2007. The earth moving equipment promised by President Chavez of Venezuela is expected to arrive in St. Vincent and the Grenadines before year’s end 2007.

For the first 12 months of the earthworks stage of the project, the plan is to concentrate on the first kilometre of runway. This covers the area from the Southern end of the runway (Stubbs Bay end) to the Junction at Argyle, near the properties of the heirs of Colonel Sydney Anderson and the Johnsons. The IADC has been putting systems in place and has been executing its work programme with a view to allowing for the commencement of these works.

The IADC continues to do wind testing. At present, four weather stations (3 of which are gifts from Venezuela) are installed at the Argyle airport site. The wind data collected are being analysed to inform the decision on the need to construct a “cross-wind” runway for the small planes that might be affected by heavy gusts as they attempt to use the main runway. The historical wind data will also be useful to air traffic controllers when the airport becomes operational.

Review of airport plans by ECCAA

In June 2007, representatives of the Eastern Caribbean Civil Aviation Authority (ECCAA) visited St Vincent and the Grenadines and indicated their approval of the plans for the Argyle International Airport as contained in the preliminary report submitted to them. They have, as expected, sought clarification on a few minor points, which the IADC will address in a follow up meeting with them in early 2008.

New roads

Two new roads have to be constructed as a result of the new airport. A new segment of the Windward Highway – the bypass road – is being done and is scheduled to be completed by July 2008. This project involves about 3 kilometres of road from Mt Pleasant to Peruvian Vale and a new reinforced concrete bridge. The project, costing US$5.2 million, is being done by C.O. Williams and funded by the Caribbean Development Bank as an additional loan to the Government of St Vincent and the Grenadines. The bypass road will be ready for public use before the existing Argyle main road is disrupted by earthworks on the second kilometre of the runway.

The IADC is also coordinating the building of a road that begins at Stubbs, crossing the airport zone at the southern end of the runway, and terminating in Argyle. This road is being done to provide access to homeowners who will continue to reside in the Mt Pleasant area, on the Eastern or seaside of the Argyle International Airport, as well as property owners and visitors to the recreational pond at Rawacou. At present, work on the road is at the design stage; this new road is expected to be completed by the last quarter of 2008.

Environmental Impact Assessment

In implementing the Argyle International Airport project, one of the responsibilities of the IADC is to identify and assess the potential environmental impacts of the airport and to put measures in place to prevent or reduce the negative impacts and amplify the positive ones.

In consideration of its responsibility, IADC signed a contract with Kocks Consult GMBH of Germany in September 2007 to undertake an Environmental Impact Assessment (EIA) of the airport construction. Kocks Consult is a highly recognised international firm with proven expertise in making environmental impact assessments of airport projects.

The main objective of the EIA is to ensure that the Argyle International Airport project is environmentally sound and sustainable; that decision-making is improved through appropriate analysis of actions and their likely environmental impacts; and that stakeholders/potentially affected people are properly consulted. The EIA assessment is expected to be completed within eight months and at a contract value of EC$782,352.

Negotiations with and payment to property owners

The IADC is in the process of making final payments to property owners for built properties and final arrangements to pay for the vacant land parcels in the airport zone.

To date, IADC has settled with 115 of the 131 homeowners or built property owners on the site. Of the 115 owners with whom IADC has settled, 98 of them have been paid, amounting to $40,208,297. The estimated value of the other 33 properties is $17,791,702. In total therefore, the value of the 131 built properties on the site is $58 million, with an average built property value of $442,748.

In terms of the value of the vacant land parcels: There are 286 land parcels within the area. These lands have an estimated value of $46,147,053, meaning that altogether, the estimated cost of acquiring all properties on the airport site is $104 million.

Site acquisition is a cost to the Government. This is met through IADC’s land sales, being done by National Properties, the IADC’s sales agent. As land sales will take time, the financial plan elaborated at the inception of the project has been and continues to be to use bridging finance. So far the IADC has attracted two bridging loans: EC$20 from the National Insurance Services, and EC$30 million from the First Caribbean International Bank. These loans will be repaid over 5 years and 4 years respectively from land sales proceeds.

Relocation of homeowners

The relocation and rebuilding efforts have been going well. During the year, in addition to the 21 acre parcel of land at Harmony Hall, the IADC has also bought and is in the process of developing for sale to affected Mt Pleasant and Argyle property owners 31/2 acres of land at Carapan, and 3 acres at Diamond. Most of these land parcels have

been sold.

Of those homeowners who have been paid for their properties to date, 34 have commenced rebuilding at Harmony Hall or elsewhere. These homes are at varying stages of completion. Some homeowners have indicated that they do not intend to rebuild. Nevertheless, the IADC is working closely with those homeowners who are in the area where work will be concentrated so that they are relocated in time to make way for the earthworks to commence.

Airport operation and maintenance

IADC is now in the process of negotiating with the Malaysian Airport Authority which, on government’s invitation, has formally expressed an interest in providing management consultancy services for the Argyle International Airport. Though the details of the consultancy have not yet been fully worked out, it is expected that the consultancy services would include airport planning design, facilities planning, and operation and maintenance. The Malaysian Airport Authority has extensive experience in the management of airports, both within and outside of Malaysia. Their willingness to partner with the IADC would ensure that the Argyle International Airport gets the quality management it needs to realise the returns from the huge investment made in that project.

Outlook for 2008

For the year 2008, IADC’s main focus will be on the earthworks (concentrating on the first kilometre of the runway), the two new roads that are being built, and on the compensation and relocation of the remaining property owners.