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Managing the Airport Landside System 163 year. The FAA's Policy Regarding Airport Rates and Charges broadly governs airport rate-setting in the absence of an airline agreement and dispute resolution. Concession Agreements Many airport operators enter into agreements with service providers, including parking garage operators, rental car agencies, and vendors of food, news items, and gifts. These agreements are often the largest source of non-airline revenues at most airports and do not govern how those revenues can be used. Sources of Funding FAA grant assurances require airports in the United States to be as financially sustaining as pos- sible. Accordingly, rentals, fees, and charges should cover all operating and capital costs, including retirement of debt. The capital requirements of airports are significant today and are expected to increase in the future. The main sources of funds to build airport projects include the following: Internally generated capital resulting from retained airport revenues--Airport operators charge and collect rentals, fees, and charges for the lease and use of facilities to passenger and cargo airlines, concessionaires, and others providing airport support services. Bond proceeds--Four basic types of bonds are issued to fund airport capital improvements: (1) general airport revenue bonds (GARBs) secured by the revenues of the airport and other revenues as may be defined in the bond indenture; (2) bonds backed either solely by passen- ger facility charges (PFC) revenues or by PFC revenues and airport revenues generated by rentals, fees, and charges; (3) special facility bonds backed solely by revenues from a facility constructed with proceeds of those bonds; and (4) general obligation bonds supported by the overall tax base of the issuing entity (the airport sponsor). PFC revenues--Subject to authorization by FAA, commercial service airports are allowed to impose a $1, $2, $3, $4, or $4.50 PFC per enplaning passenger. The $4 and $4.50 PFC amounts are pursuant to the Aviation Investment and Reform Act for the 21st Century (AIR-21) FAA reauthorization. PFC revenues may be used as they are received (on a pay-as-you-go basis) to directly pay for approved capital projects or they may be used to pay debt service on bonds backed by PFC revenues. Federal grants--Federal Airport Improvement Program (AIP) grants are funded by aviation- user taxes. AIP grants are made available to airport operators in two forms: (1) entitlement funds, which are apportioned to airports based on levels of passenger traffic and landed weight (for cargo entitlement funds), and (2) discretionary funds, which are distributed based on the ranking of the airport's projects in relation to other projects deemed most important for improving the national air transportation system. Federal funding is also occasionally pro- vided for airport surface transportation projects by FHWA and FTA. State and local grants--State funding for airport and aviation-related projects typically comes from a variety of sources. Some of these, such as outright grants and matching share for fed- eral AIP grants, represent direct funding for airports. Others, such as registration, licensing fees, and dedicated or special taxes (e.g., fuel taxes), are collected as funding for more general state expenditures. Support from local government generally takes the form of bonds backed by general taxes, but can also include operating funds from local taxes. The distribution of funding sources for large- and medium-hub airports nationwide is sum- marized in Table 7-1. As shown in the table, airport revenue bond proceeds constitute the most significant source of funding, accounting for 58% of total funding for airport capital projects. AIP grants accounted for 21%; PFCs accounted for 11%; and retained earnings and local rev- enue accounted for 10% of the total.