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21 capital, would be the most likely issuers of TCBs. Although Bond Anticipation Notes smaller airports would not be excluded, the resource demands on smaller airports for this type of issuance would be relatively BANs are short-term financing mechanisms that provide cap- high compared with their smaller borrowing needs. ital in advance of issuing long-term bonds. Various airports around the country have issued BANs, although commercial OTHER FORMS OF AIRPORT FINANCING paper may be a more cost-effective way of managing cash flow for some airports. Airport operators use many other financial instruments to access and use the capital markets, including: Grant Anticipation Notes Commercial paper, GANs are short-term financing mechanisms that provide Bond anticipation notes (BANs), capital in advance of receiving expected grants. Grant anticipation notes (GANs), Pooled credit, and Pooled Credit Capital leases. Pooled credit is attractive for airport operators that have dif- Commercial Paper ficulty accessing the credit markets; however, few airport operators are actually in that situation, as most at a minimum Commercial paper is a money market security that is gener- can work with the city, county, or state that is the airport ally not used to finance long-term investments, but rather to sponsor to issue GO debt. There are several examples of manage cash flow. It is commonly bought by money funds, pooled credit for airports. and is generally regarded as a very safe investment. As a rel- atively low-risk option, commercial paper interest rates are American Association of Airport Executives (AAAE) low. Commercial paper can only be "out" for 270 days, but can Airport Capital Projects Loan Program--In December be "taken out" with more commercial paper and ultimately is 2000, AAAE and the Capital Projects Finance Authority taken out typically with bond proceeds. issued $300,000,000 of Variable Rate Demand Rev- enue Bonds to fund the AAAE Airport Capital Projects Commercial paper is used on a routine basis at some air- Bond Loan Program. AAAE established the program to ports, particularly large airports and airports that operate make low-cost, tax-exempt loans to eligible airports to independently as authorities, but is much more difficult at finance improvements and equipment that constitute some airports, particularly those that operate as enterprise non-AMT governmental use projects under federal tax funds of a city, county, or state that have centralized financial law. The program offered airport operators a flexible management. Airport operators that routinely use commercial and low-cost method of financing capital needs (Airport paper to manage cash flow include the operators of airports Capital Projects Loan Program 2001). in Boston, Seattle, and San Francisco (see Figure 16). No loans were made under the program owing to sev- eral factors, including (1) changes in airport priorities away from capital development immediately after 9-11; (2) a limited number of projects that meet the eligibility criteria for tax-exempt financing (as mentioned in chap- ter four, terminal projects do not qualify and until a few years ago airfield projects did not qualify); and (3) the lack of difficulty that airport operators have in access- ing the capital markets. According to AAAE staff, the program was never formally ended, but is not active. Virginia Resources Authority's (VRA) Airport Revolv- ing Revenue Fund--The VRA airport revolving fund pool includes 12 borrowers as of January 31, 2007. Approximately 65% of the $70 million in outstanding debt is tied to the Capital Region Airport Commission, which runs the airport in Richmond, Virginia; there- fore, Richmond's credit rating drives that of the entire pool. In August 2006, the credit rating for the VRA pool was upgraded by Fitch Ratings, based on Rich- mond International Airport's improved operating performance and enhanced stability in the overall air- FIGURE 16 San Francisco International Airport--Use of port sector since 2001 ("Virginia: VRA Airport Pool commercial paper to provide low-cost cash flow. Upgraded" 2006).