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AIRPORT ACRPSYNTHESIS 1 COOPERATIVE RESEARCH PROGRAM Innovative Finance and Alternative Sources of Revenue for Airports

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ACRP OVERSIGHT COMMITTEE* TRANSPORTATION RESEARCH BOARD 2007 EXECUTIVE COMMITTEE* CHAIR OFFICERS JAMES WILDING Chair: Linda S. Watson, CEO, LYNXCentral Florida Regional Transportation Authority, Orlando Independent Consultant Vice Chair: Carol A. Murray, Commissioner, New Hampshire DOT, Concord Executive Director: Robert E. Skinner, Jr., Transportation Research Board VICE CHAIR MEMBERS JEFF HAMIEL MinneapolisSt. Paul Metropolitan J. BARRY BARKER, Executive Director, Transit Authority of River City, Louisville, KY Airports Commission MICHAEL W. BEHRENS, Executive Director, Texas DOT, Austin ALLEN D. BIEHLER, Secretary, Pennsylvania DOT, Harrisburg MEMBERS JOHN D. BOWE, President, Americas Region, APL Limited, Oakland, CA LARRY L. BROWN, SR., Executive Director, Mississippi DOT, Jackson JAMES CRITES DEBORAH H. BUTLER, Vice President, Customer Service, Norfolk Southern Corporation DallasFt. Worth International Airport and Subsidiaries, Atlanta, GA RICHARD DE NEUFVILLE ANNE P. CANBY, President, Surface Transportation Policy Partnership, Washington, DC Massachusetts Institute of Technology NICHOLAS J. GARBER, Henry L. Kinnier Professor, Department of Civil Engineering, University KEVIN C. DOLLIOLE of Virginia, Charlottesville LambertSt. Louis International Airport ANGELA GITTENS, Vice President, Airport Business Services, HNTB Corporation, Miami, FL JOHN K. DUVAL SUSAN HANSON, Landry University Professor of Geography, Graduate School of Geography, MassportBoston Logan Clark University, Worcester, MA International Airport ADIB K. KANAFANI, Cahill Professor of Civil Engineering, University of California, Berkeley STEVE GROSSMAN HAROLD E. LINNENKOHL, Commissioner, Georgia DOT, Atlanta Oakland International Airport MICHAEL D. MEYER, Professor, School of Civil and Environmental Engineering, Georgia TOM JENSEN Institute of Technology, Atlanta National Safe Skies Alliance DEBRA L. MILLER, Secretary, Kansas DOT, Topeka CATHERINE M. LANG MICHAEL R. MORRIS, Director of Transportation, North Central Texas Council of Federal Aviation Administration Governments, Arlington GINA MARIE LINDSEY JOHN R. NJORD, Executive Director, Utah DOT, Salt Lake City McBee Strategy Consulting PETE K. RAHN, Director, Missouri DOT, Jefferson City CAROLYN MOTZ SANDRA ROSENBLOOM, Professor of Planning, University of Arizona, Tucson Hagerstown Regional Airport TRACY L. ROSSER, Vice President, Corporate Traffic, Wal-Mart Stores, Inc., Bentonville, AR RICHARD TUCKER ROSA CLAUSELL ROUNTREE, Executive Director, Georgia State Road and Tollway Authority, Huntsville International Airport Atlanta HENRY G. (GERRY) SCHWARTZ, JR., Senior Professor, Washington University, St. Louis, MO EX OFFICIO MEMBERS C. MICHAEL WALTON, Ernest H. Cockrell Centennial Chair in Engineering, University of SABRINA JOHNSON Texas, Austin U.S. Environmental Protection Agency STEVE WILLIAMS, Chairman and CEO, Maverick Transportation, Inc., Little Rock, AR RICHARD MARCHI Airports Council International EX OFFICIO MEMBERS North America THAD ALLEN (Adm., U.S. Coast Guard), Commandant, U.S. Coast Guard, Washington, DC JOHN M. MEENAN THOMAS J. BARRETT (Vice Adm., U.S. Coast Guard, ret.), Pipeline and Hazardous Materials Air Transport Association of America Safety Administrator, U.S.DOT HENRY OGRODZINSKI MARION C. BLAKEY, Federal Aviation Administrator, U.S.DOT National Association of State Aviation JOSEPH H. BOARDMAN, Federal Railroad Administrator, U.S.DOT Officials JOHN A. BOBO, JR., Acting Administrator, Research and Innovative Technology Administration, ROBERT E. SKINNER, JR. U.S.DOT Transportation Research Board REBECCA M. BREWSTER, President and COO, American Transportation Research Institute, TOM ZOELLER Smyrna, GA American Association of Airport GEORGE BUGLIARELLO, Chancellor, Polytechnic University of New York, Brooklyn, Executives and Foreign Secretary, National Academy of Engineering, Washington, DC J. RICHARD CAPKA, Federal Highway Administrator, U.S.DOT SECRETARY SEAN T. CONNAUGHTON, Maritime Administrator, U.S.DOT ROBERT J. REILLY EDWARD R. HAMBERGER, President and CEO, Association of American Railroads, Transportation Research Board Washington, DC JOHN H. HILL, Federal Motor Carrier Safety Administrator, U.S.DOT JOHN C. HORSLEY, Executive Director, American Association of State Highway and Transportation Officials, Washington, DC J. EDWARD JOHNSON, Director, Applied Science Directorate, National Aeronautics and Space Administration, John C. Stennis Space Center, MS WILLIAM W. MILLAR, President, American Public Transportation Association, Washington, DC NICOLE R. NASON, National Highway Traffic Safety Administrator, U.S.DOT JEFFREY N. SHANE, Under Secretary for Policy, U.S.DOT JAMES S. SIMPSON, Federal Transit Administrator, U.S.DOT CARL A. STROCK (Lt. Gen., U.S. Army), Chief of Engineers and Commanding General, U.S. Army Corps of Engineers, Washington, DC *Membership as of January 2007. *Membership as of January 2007.

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AIRPORT COOPERATIVE RESEARCH PROGRAM ACRP SYNTHESIS 1 Innovative Finance and Alternative Sources of Revenue for Airports A Synthesis of Airport Practice CONSULTANT CINDY NICHOL Jacobs Consultancy Burlingame, California S UBJECT A REAS Aviation and Planning and Administration Research Sponsored by the Federal Aviation Administration TRANSPORTATION RESEARCH BOARD WASHINGTON, D.C. 2007 www.TRB.org

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AIRPORT COOPERATIVE RESEARCH PROGRAM ACRP SYNTHESIS 1 Airports are vital national resources. They serve a key role in Project 11-03, Topic S01-01 transportation of people and goods and in regional, national, and ISSN 1935-9187 international commerce. They are where the nation's aviation sys- ISBN 978-0-309-09783-3 tem connects with other modes of transportation and where federal Library of Congress Control Number 2007923932 responsibility for managing and regulating air traffic operations 2007 Transportation Research Board intersects with the role of state and local governments that own and operate most airports. Research is necessary to solve common oper- ating problems, to adapt appropriate new technologies from other industries, and to introduce innovations into the airport industry. COPYRIGHT PERMISSION The Airport Cooperative Research Program (ACRP) serves as one Authors herein are responsible for the authenticity of their materials and for of the principal means by which the airport industry can develop obtaining written permissions from publishers or persons who own the innovative near-term solutions to meet demands placed on it. copyright to any previously published or copyrighted material used herein. The need for ACRP was identified in TRB Special Report 272: Cooperative Research Programs (CRP) grants permission to reproduce Airport Research Needs: Cooperative Solutions in 2003, based on material in this publication for classroom and not-for-profit purposes. a study sponsored by the Federal Aviation Administration (FAA). Permission is given with the understanding that none of the material will The ACRP carries out applied research on problems that are shared be used to imply TRB or FAA endorsement of a particular product, method, by airport operating agencies and are not being adequately or practice. It is expected that those reproducing the material in this addressed by existing federal research programs. It is modeled after document for educational and not-for-profit uses will give appropriate the successful National Cooperative Highway Research Program acknowledgment of the source of any reprinted or reproduced material. For and Transit Cooperative Research Program. The ACRP undertakes other uses of the material, request permission from CRP. research and other technical activities in a variety of airport subject areas, including design, construction, maintenance, operations, safety, security, policy, planning, human resources, and adminis- NOTICE tration. The ACRP provides a forum where airport operators can cooperatively address common operational problems. The project that is the subject of this report was a part of the Airport The ACRP was authorized in December 2003 as part of the Cooperative Research Program conducted by the Transportation Research Vision 100-Century of Aviation Reauthorization Act. The primary Board with the approval of the Governing Board of the National Research participants in the ACRP are (1) an independent governing board, Council. Such approval reflects the Governing Board's judgment that the the ACRP Oversight Committee (AOC), appointed by the Secretary project concerned is appropriate with respect to both the purposes and resources of the National Research Council. of the U.S. Department of Transportation with representation from The members of the technical advisory panel selected to monitor this airport operating agencies, other stakeholders, and relevant indus- project and to review this report were chosen for recognized scholarly try organizations such as the Airports Council InternationalNorth competence and with due consideration for the balance of disciplines America (ACINA), the American Association of Airport Execu- appropriate to the project. The opinions and conclusions expressed or tives (AAAE), the National Association of State Aviation Officials implied are those of the research agency that performed the research, and (NASAO), and the Air Transport Association (ATA) as vital links while they have been accepted as appropriate by the technical panel, they to the airport community; (2) the TRB as program manager and sec- are not necessarily those of the Transportation Research Board, the National retariat for the governing board; and (3) the FAA as program spon- Research Council, or the Federal Aviation Administration of the U.S. sor. In October 2005, the FAA executed a contract with the National Department of Transportation. Academies formally initiating the program. Each report is reviewed and accepted for publication by the technical The ACRP benefits from the cooperation and participation of air- panel according to procedures established and monitored by the port professionals, air carriers, shippers, state and local government Transportation Research Board Executive Committee and the Governing officials, equipment and service suppliers, other airport users, and Board of the National Research Council. research organizations. Each of these participants has different interests and responsibilities, and each is an integral part of this cooperative research effort. Research problem statements for the ACRP are solicited period- The Transportation Research Board of the National Academies, the National Research Council, and the Federal Aviation Administration (sponsor of ically but may be submitted to the TRB by anyone at any time. It is the Airport Cooperative Research Program) do not endorse products or the responsibility of the AOC to formulate the research program by manufacturers. Trade or manufacturers' names appear herein solely because identifying the highest priority projects and defining funding levels they are considered essential to the clarity and completeness of the project and expected products. reporting. Once selected, each ACRP project is assigned to an expert panel, appointed by the TRB. Panels include experienced practitioners and research specialists; heavy emphasis is placed on including airport professionals, the intended users of the research products. The panels prepare project statements (requests for proposals), select contractors, and provide technical guidance and counsel throughout the life of the Published reports of the project. The process for developing research problem statements and selecting research agencies has been used by TRB in managing coop- AIRPORT COOPERATIVE RESEARCH PROGRAM erative research programs since 1962. As in other TRB activities, are available from: ACRP project panels serve voluntarily without compensation. Primary emphasis is placed on disseminating ACRP results to the Transportation Research Board intended end-users of the research: airport operating agencies, service Business Office 500 Fifth Street, NW providers, and suppliers. The ACRP produces a series of research Washington, DC 20001 reports for use by airport operators, local agencies, the FAA, and other interested parties, and industry associations may arrange for work- and can be ordered through the Internet at http://www.national-academies.org/trb/bookstore shops, training aids, field visits, and other activities to ensure that results are implemented by airport-industry practitioners. Printed in the United States of America

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The National Academy of Sciences is a private, nonprofit, self-perpetuating society of distinguished schol- ars engaged in scientific and engineering research, dedicated to the furtherance of science and technology and to their use for the general welfare. On the authority of the charter granted to it by the Congress in 1863, the Academy has a mandate that requires it to advise the federal government on scientific and techni- cal matters. Dr. Ralph J. Cicerone is president of the National Academy of Sciences. The National Academy of Engineering was established in 1964, under the charter of the National Acad- emy of Sciences, The National as a parallel Academy organization of Sciences of outstanding is a private, nonprofit,engineers. It is autonomous self-perpetuating society of in its administration distinguished schol- andengaged ars in the selection of its in scientific members, and sharing engineering with the research, National dedicated Academy to of Sciences the furtherance the responsibility of science for and technology advising the federal government. The National Academy of Engineering also sponsors engineering and to their use for the general welfare. On the authority of the charter granted to it by the Congress in programs aimed the 1863, at meeting Academy national needs, encourages has a mandate education that requires andthe it to advise research, federal and recognizes government on the superior scientific andachieve- techni- ments cal of engineers. matters. Dr. Dr. Ralph J.William CiceroneA.isWulf is president president of the National of the National AcademyAcademy of Engineering. of Sciences. The National The Institute Academy of Medicine was established of Engineering wasin 1970 by the established National in 1964, Academy under of Sciences the charter to secure of the National the Acad- services of eminent members of appropriate professions in the examination of policy matters pertaining emy of Sciences, as a parallel organization of outstanding engineers. It is autonomous in its administration to andthe in health of the public. the selection The Institute of its members, acts sharing under with thethe responsibility National Academy given to the National of Sciences Academyfor the responsibility of Sciences by federal advising the its congressional government.charter to be an Academy The National adviser toof the federal government Engineering and,engineering also sponsors on its own initiative, programs to identify aimed issues national at meeting of medical care, needs, research, education encourages and education. Dr. Harvey and research, V. Fineberg and recognizes issuperior the president of the achieve- Institute of Medicine. ments of engineers. Dr. William A. Wulf is president of the National Academy of Engineering. The National The Institute Research of Medicine Council was organized was established by the in 1970 byNational Academy the National of Sciences Academy in 1916 of Sciences toto associate secure the the broadof services community of science eminent members ofand technology appropriate with the Academy's professions purposes of in the examination of furthering knowledge policy matters and pertaining advising the federal to the health of the government. Functioning public. The Institute acts in accordance under with general the responsibility policies given determined to the National by the Acad- Academy of emy, the Council has become the principal operating agency of both the National Academy Sciences by its congressional charter to be an adviser to the federal government and, on its own initiative, of Sciences and the National to identify issues Academy of medical of care, Engineering research, inand providing services education. to the government, Dr. Harvey V. Fineberg the public, and is president the of the scientific Institute ofand engineering communities. The Council is administered jointly by both the Academies and Medicine. the Institute of Medicine. Dr. Ralph J. Cicerone and Dr. William A. Wulf are chair and vice chair, The National respectively, Research of Council the National was organized Research Council. by the National Academy of Sciences in 1916 to associate the broad community of science and technology with the Academy's purposes of furthering knowledge and The Transportation advising Research Board the federal government. is a division Functioning of the National in accordance Research with general Council, policies which determined by serves the the Acad- National emy, the Academy Council hasof Sciences become and the the National principal Academy operating of Engineering. agency of both theThe Board'sAcademy National mission isof toSciences promote innovation and progress and the National Academy in transportation of Engineering through research. in providing In an to services objective and interdisciplinary the government, the public, and setting, the the scientific and engineering communities. The Council is administered jointly by both the Academies and Board facilitates the sharing of information on transportation practice and policy by researchers and practitioners; the Institute of stimulates Medicine. research Dr. RalphandJ. offers Ciceroneresearch and Dr. management William A.services Wulf are that promote chair and vice technical chair, excellence; provides respectively, expertResearch of the National advice on transportation policy and programs; and disseminates research Council. results broadly and encourages their implementation. The Board's varied activities annually engage more The than Transportation 5,000 engineers, Research scientists, Board is a and other division of the transportation National and researchers Research Council, practitioners fromwhich serves and the public the National Academy of Sciences and the National Academy of Engineering. The Board's mission private sectors and academia, all of whom contribute their expertise in the public interest. The program is is to promote innovation supported by and progress state in transportation transportation through departments, research. federal agencies Inincluding an objective and interdisciplinary the component administrationssetting, of the the Board facilitates the U.S. Department ofsharing of information Transportation, and on transportation other organizationspractice and and policy by individuals researchers interested in and the practitioners; development of stimulates research transportation. and offers research management services that promote technical www.TRB.org excellence; provides expert advice on transportation policy and programs; and disseminates research results broadly and encourages their implementation. The Board's varied activities annually engage more www.national-academies.org than 5,000 engineers, scientists, and other transportation researchers and practitioners from the public and private sectors and academia, all of whom contribute their expertise in the public interest. The program is supported by state transportation departments, federal agencies including the component administrations of the U.S. Department of Transportation, and other organizations and individuals interested in the development of transportation. www.TRB.org www.national-academies.org

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ACRP COMMITTEE FOR PROJECT 11-03 COOPERATIVE RESEARCH PROGRAMS STAFF ROBERT J. REILLY, Director, Cooperative Research Programs CHAIR CHRISTOPHER W. JENKS, Manager, ACRP BURR STEWART EILEEN P. DELANEY, Director of Publications Port of Seattle ACRP SYNTHESIS STAFF MEMBERS STEPHEN R. GODWIN, Director for Studies GARY C. CATHEY and Special Programs California Department of Transportation JON WILLIAMS, Manager, Synthesis Studies KEVIN C. DOLLIOLE GAIL STABA, Senior Program Officer LambertSt. Louis International Airport DON TIPPMAN, Editor BERTA FERNANDEZ CHERYL Y. KEITH, Senior Program Assistant Landrum & Brown JULIE KENFIELD TOPIC PANEL Carter & Burgess, Inc. GARY C. CATHEY, California Department of Transportation CAROLYN MOTZ KEVIN C. DOLLIOLE, LambertSt. Louis International Airport Hagerstown Regional Airport BERTA FERNANDEZ, Landrum & Brown CHRISTINE GERENCHER, Transportation Research Board FAA LIAISON JULIE KENFIELD, Carter & Burgess, Inc. LORI LEHNARD FRANK N. LISLE, Transportation Research Board CAROLYN MOTZ, Hagerstown Regional Airport ACINORTH AMERICA LIAISON BURR STEWART, Port of Seattle RICHARD MARCHI LORI LEHNARD, Federal Aviation Administration (Liaison) RICHARD MARCHI, Airports Council InternationalNorth America TRB LIAISON (Liaison) CHRISTINE GERENCHER

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FOREWORD Airport administrators, engineers, and researchers often face problems for which infor- By Staff mation already exists, either in documented form or as undocumented experience and prac- Transportation tice. This information may be fragmented, scattered, and unevaluated. As a consequence, Research Board full knowledge of what has been learned about a problem may not be brought to bear on its solution. Costly research findings may go unused, valuable experience may be overlooked, and due consideration may not be given to recommended practices for solving or alleviat- ing the problem. There is information on nearly every subject of concern to the airport industry. Much of it derives from research or from the work of practitioners faced with problems in their day- to-day work. To provide a systematic means for assembling and evaluating such useful in- formation and to make it available to the entire airport community, the Airport Cooperative Research Program authorized the Transportation Research Board to undertake a continu- ing project. This project, ACRP Project 11-03, "Synthesis of Information Related to Air- port Practices," searches out and synthesizes useful knowledge from all available sources and prepares concise, documented reports on specific topics. Reports from this endeavor constitute an ACRP report series, Synthesis of Airport Practice. This synthesis series reports on current knowledge and practice, in a compact format, without the detailed directions usually found in handbooks or design manuals. Each report in the series provides a compendium of the best knowledge available on those measures found to be the most successful in resolving specific problems. PREFACE This synthesis study is intended to inform airport operators, stakeholders, and policy- makers about alternative financing options and revenue sources currently available or that could be available in the future in the United States. The report provides a brief overview of common capital funding sources used by airport operators, a review of capital financing mechanisms used by airports, descriptions of various revenue sources developed by airport operators, and a review of privatization options available to U.S. airport operators. Information used in this study was acquired through a review of the literature and inter- views with airport operators and industry experts. Cindy Nichol, Jacobs Consultancy, Burlingame, California, collected and synthesized the information and wrote the report. The members of the topic panel are acknowledged on the preceding page. This synthesis is an immediately useful document that records the prac- tices that were acceptable within the limitations of the knowledge available at the time of its preparation. As progress in research and practice continues, new knowledge will be added to that now at hand.

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CONTENTS 1 SUMMARY 5 CHAPTER ONE INTRODUCTION Purpose of Report, 5 Study Methodology, 5 Report Structure, 5 General Background on Airport Financial Operations, 6 13 CHAPTER TWO FINANCING MECHANISMS--AIRPORT PRACTICES AND INNOVATIONS Airport Access to Credit, 13 Types of Airport Bonds, 13 Other Forms of Airport Financing, 21 Leveraging Future Grants, 22 24 CHAPTER THREE REVENUE SOURCES--AIRPORT PRACTICES AND INNOVATIONS Airport Parking Revenue, 24 Rental Car Revenues, 26 Terminal Concessions, 27 Advertising Programs, 29 Commercial Development and Land Use, 30 Other Innovative Revenue Enhancement Concepts, 33 35 CHAPTER FOUR ALTERNATIVE WAYS OF DOING BUSINESS Partial Privatization, 35 Full Privatization, 36 38 REFERENCES 39 BIBLIOGRAPHY 41 ACRONYMS 42 APPENDIX A STATE GRANTS AND LOANS FOR AVIATION