SFO seeks expanded short‑term commercial paper capacity as part of pandemic recovery plan

San Francisco International Airport officials told the Budget & Finance Committee Feb. 24 they are seeking permission to increase the airport’s commercial paper authorization to provide short‑term liquidity for remaining capital program needs and to reduce long‑term debt service.

Director Sattero (presenting) and Kevin Cohen (acting chief financial officer) said passenger volumes fell from roughly 58 million pre‑COVID to an estimated ~12 million through the fiscal year, forcing the airport to scale back its capital program by roughly $2.1 billion (from $7.8B to $5.7B). To take advantage of historically low short‑term interest rates, the airport proposed increasing commercial paper capacity (the presentation referenced a program target of up to $600 million) to finish certain prioritized capital work and preserve reserves.

Airport staff described a plan to use commercial paper largely for capital projects (they said use for operations is a last resort), then refinance those short‑term notes into general airport revenue bonds within market windows; a bank letter of credit backs the commercial paper as a safety mechanism. Cohen estimated that long‑term bonds could carry rates in the mid‑3% to low‑4% range while commercial paper is trading at fractions of a percent, creating near‑term savings. Committee members pressed about the possibility of rolling commercial paper in a rising‑rate environment, oversight, policing costs and how much of the program would be held in reserve as liquidity.

The Budget Legislative Analyst recommended an amendment for a June written update on the airport’s financial condition as it pertains to the commercial paper program; airport staff accepted the amendment. The committee voted to move the item to the full Board with a positive recommendation.

Quotes from the hearing: "We anticipate using about $300 million of this to finish the capital program," Director Sattero said, adding that the balance is being held in reserve as a protection mechanism. Kevin Cohen said, "For these types of bonds in the current market ... would probably charge an interest rate of somewhere between the high 3% and maybe 4 and a half percent," while commercial paper was trading near two‑tenths of one percent at that time.

What happens next: The committee forwarded the airport commercial paper resolution (as amended to request a June update) to the Board of Supervisors with a positive recommendation.