Article
Taking Partnerships to a Whole New Level
BY Grant Smith
Design-build know-how meets financial support for a new fueling facility.
Tucson Fuel Facilities, LLC (TFF) is a consortium of airlines that leases and operates the jet fuel systems for commercial carriers at Tucson International Airport (TUS). When TFF was ready to evaluate the condition of the fuel facility recently leased from the Tucson Airport Authority (TAA), it partnered with the firm that had designed the original facility: Burns & McDonnell.
After reviewing this 45-year-old facility, the team determined the state of the facility presented issues too significant to overcome. Some of these concerns included eight large, single-wall underground storage tanks and electrical components with outdated parts no longer available from the manufacturers.
With this information, TFF leaders then evaluated their options alongside the TAA, deciding the most effective decision was to build a brand-new fuel facility. However, this decision presented some potential issues. Details on exactly what was needed could not be determined until the design could be further along. Additionally, a lease amendment for the new facility would need to be finalized before the fuel consortium would be able to secure a loan for the project.
In an effort to move forward with the project and overcome these barriers, TFF requested that the Burns & McDonnell team finance the design portion of the work. As a long-term business partner that has assisted other clients in this matter, Burns & McDonnell agreed to finance the initial stage of the project. This would define the project scope and budget in a manner that assisted TFF with obtaining the project construction financing. This helped to fulfill the needs the fuel consortium had in completing the project.
By partnering with the fuel consortium, whose members represent multiple airlines throughout the country, the Burns & McDonnell team has accelerated the project by 12 months using a design-build delivery method. A fully operational facility will be designed and constructed by late 2021.
Read more about this project at burnsmcd.com/TucsonCaseStudy.
Private Financing for Fueling Projects
TFF faced three potential problems:
- First, the organization didn’t want to tax itself on its throughput to pay for the system upgrades, as the throughput amount was too low to make this an effective solution.
- Second, it did not want to borrow too much or too little capital for financing the engineering and design portion of the project.
- Finally, the scope for the entire project was not clearly defined upfront, limiting TFF’s ability to build a budget.
These circumstances made a private finance solution attractive.
Other midsized airports with fuel consortiums could be facing similar issues. Fortunately, this type of solution could be applicable to those organizations.
When a project needs to be completed quickly to meet changing needs, fuel consortiums may not have all the lease, contractual and financial pieces in place. With a private finance solution, the upfront planning, design and cost estimating needed to define a project can be completed without requiring a consortium to have the capital necessary for project engineering. Additionally, the project execution model incorporates a design-build partner who is fully invested in the successful outcome of the project from the very beginning.
Through this modified approach to a public-private partnership, TFF will be able to get the facility upgrades it needs while avoiding potential pitfalls of overborrowing or adding a self-assessment to its throughput.
This option may be available for airlines, tenants or airports. Understanding and keeping this financing option in mind could help fuel future projects by offering a solution that saves time and, therefore, reduces cost.
Author
Grant Smith
Managing Director, Commercial Fueling
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