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164 Ground Access to Major Airports by Public Transportation Table 7-1. Estimated U.S. airport capital sources (5-year annual average, 20002004). Funding Funding Capital Funding Source ($ billions) (% of total) Bond Proceeds ("new money" bonds backed by airport revenues, including about $ 6.9 58% 30% of PFC collections) AIP Grants $ 2.4 21% PFC Collections (approximate 70% share used for pay-as-you-go funding) $ 1.3 11% Pay-as-you-go Funding (from retained earnings, state & local grants, other) $ 1.2 10% Average Annual Funding $11.8 100% SOURCE: Jacobs Consultancy, FAA, U.S. Treasury, Thomson Financial Securities Data, ACI-NA. Federal Funding and Financial Oversight of Airports and Airport Access Projects In developing any strategy for funding off-airport access projects, it is important to recognize the challenges uniquely associated with each funding source and to identify the external approvals required for each, if any. This summary examines federal funding and financial over- sight of airports and focuses specifically on AIP grants, PFCs, and use of airport revenue. AIP Grants The federal AIP provides grants to support eligible capital projects. AIP funds come from the Aviation Trust Fund that is funded by taxes or user fees, including the airline ticket tax, a tax on air-freight waybills, an international departure fee, and a tax on general aviation gasoline and jet fuel. Eligible Access Roads. AIP grants can be used for airport access roads that meet the follow- ing conditions as provided in FAA Order 5100.38C, AIP handbook, Paragraph 620.a: The access road may extend only to the nearest public highway of sufficient capacity to accom- modate airport traffic. The access road must be located on the airport or within a right-of-way acquired by the air- port sponsor. The access road must exclusively serve airport traffic. Any section of the roadway that does not exclusively serve airport traffic is ineligible. More than one access road is eligible if the airport surface traffic is of sufficient volume to require more than one road. Related facilities such as acceleration and deceleration lanes, exit and entrance ramps, street lighting, and bus stops are also eligible when they are a necessary part of an eligible road. Certain access roads and related facilities are not eligible for AIP funding, including the following: Roads necessary to maintain FAA facilities installed under the Facilities and Equipment Pro- gram (which is budgeted separately from AIP) Roads exclusively serving industrial or non-aviationrelated areas or facilities Roads exclusively used for connecting parking facilities to an access road Eligible Rapid Transit Facilities. Facilities within the airport boundary that are necessary to provide a connection to a rapid transit system may be eligible if they primarily serve the air- port. FAA reviews such projects on a case-by-case basis. When an on-airport facility would have

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Managing the Airport Landside System 165 both airport and general use, FAA has limited AIP and PFC funding to components of the proj- ect that are reserved for exclusive airport use. Passenger Facility Charges In 1990, the U.S. Congress authorized PFCs to provide airports with an additional source of funding for capital projects. Under U.S. DOT regulations, a public agency that controls a com- mercial airport may be authorized to impose a PFC of $1, $2, or $3 per enplaned passenger. Projects eligible for PFC funding include those that preserve or enhance safety, capacity, or security of the national air transportation system; reduce noise from an airport that is part of the system; or furnish opportunities for enhanced competition between or among air carriers. In 1991, federal guidance made ground transportation projects eligible for PFC funding if the pub- lic agency owns or acquires the right-of-way and any necessary land, although the FAA did not set any eligibility restrictions on the mode of transportation for airport access projects nor did it impose any requirements on the geographic proximity of the project to the airport. Typically, these projects are limited to areas on the airport or adjacent to the airport in light of the right- of-way requirement. Such projects are subject to FAA review on a case-by-case basis. AIR-21 authorized airports to collect PFCs of $4 and $4.50, but included additional eligibility requirements on the amounts that exceed $3. Large- and medium-hub airport operators must demonstrate that (1) a project will make significant contribution to improving safety and security, to increasing competition, to reducing current or anticipated congestion, or to reducing the impact of noise and (2) the project cannot otherwise be paid for from AIP. For surface or terminal projects, airport operators must be able to demonstrate that they have already made adequate provision for financing airside needs. In addition, large- or medium-hub airport operators charging a $4 or $4.50 PFC must forgo 75% of their AIP entitlements. Use of Airport Revenues Four federal statutes govern the use of airport revenue: Airport and Airway Improvement Act of 1982 (AAIA), as amended--AAIA directed airport operators to "use all revenues generated by the airport for the capital or operating costs of the airport, the local airport system, or other local facilities which are owned or operated by the owner or operator of the airport and directly related to the actual transportation of passen- gers or property." Airport and Airway Safety and Capacity Expansion Act of 1987--Among other provisions, this act narrowed the permitted uses of airport revenues to non-airport facilities that are "sub- stantially" as well as directly related to actual air transportation. FAA Authorization Act of 1994--This act strengthened enforcement of revenue-use require- ments and required annual reporting of airport finances and amounts paid to other units of government. Section 110 added a policy statement concerning the pre-existing requirement that airports be as self-sustaining as possible. FAA Authorization Act of 1996--This act codified the pre-existing grant assurancebased revenue-use requirement and expanded the application of the revenue-use restriction to any airport that has received federal assistance. In 1999, the FAA Policy and Procedures Concerning the Use of Airport Revenue clarified a number of procedural and substantive rules that had been in effect since 1982. Key provisions are explained in the following paragraphs. Ground Access Capital Costs. Airport revenue may be used for the capital costs of an airport ground access project or for the part of a local facility that is owned or operated by the airport owner or operator and is designed exclusively for the use of air transportation of

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166 Ground Access to Major Airports by Public Transportation passengers or property, including use by airport visitors and employees ("incidental use" by non- airport users is permitted). Ground Access Operating Costs. Airport revenue may also be used to pay the operating costs of an airport ground access project that can be considered an airport capital project or, as is the case for capital costs, the operating costs of the part of a local facility that is owned or operated by the airport owner or operator and is directly and substantially related to the air transportation of passengers or property. Allowing airport revenues to be used to pay the operating costs of a ground access project represents a change in FAA policy. (Generally, if a facility is not on land owned or controlled by the airport, airport revenues cannot be used to pay for it.) Use of Property for Publicly Owned Transit Projects. Airport property can be made avail- able at less than fair market value for public transit terminals, rights-of-way, and related facili- ties without being considered a violation of federal statutes governing airport finances if (1) the transit system is publicly owned and operated (or operated by contract on behalf of the public owner) and (2) the facilities are directly and substantially related to the air transportation of passengers or property. A lease of nominal value would be consistent with the requirement for airports to be self-sustaining. Use of Property for Private Transit Projects. The final policy states that, generally, private ground transportation services are comparable to private taxi and limousine services and are charged fees for the non-aeronautical use of the airport. These private entities are commercial enterprises that operate for profit, that are not supported by general taxpayer funds, and that are a significant source of revenue for the airport. However, in cases in which publicly owned tran- sit services are limited and in which a private transit service (bus, rail, or ferry) provides the primary source of public transportation, the airport operator may make airport property avail- able at less than fair market value. Federal Credit Assistance The Transportation Infrastructure Finance and Innovation Act (TIFIA) established a direct federal credit program. TIFIA authorizes the U.S. DOT to provide direct loans, standby lines of credit, and loan guarantees to public and private sponsors of large surface transportation proj- ects that meet certain eligibility criteria. Project sponsors of highway, mass transit, passenger rail, and intermodal facilities must submit an application to U.S. DOT for approval of funding assis- tance. TIFIA funding is limited and projects are selected on a competitive basis. To be eligible to receive TIFIA credit assistance, a project must be "of national significance" and must meet the following five criteria: Before an agreement is made for federal credit assistance, the project must be in an approved state transportation improvement plan (STIP). The entity undertaking the project must submit a project application to the U.S. Secretary of Transportation. Eligible project costs must equal or exceed the lesser of $100 million or 50% of the amount of federal-aid highway funds apportioned to the states for the most recently completed fiscal year. Project financing must be repayable in part or in whole from tolls, user fees, or other dedi- cated revenue sources. If the project is not undertaken by a state or local government or an agency or instrumentality of a state or local government, the project must be included in both the state transportation plan and an approved STIP.