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Airport Finance 25 Other Capital Sources Federal and state grants, PFCs, bonds, and airport revenue make up the vast majority of cap- ital funding sources for airports. However, some airports have received funds for airport improvement projects from corporations, state or local enterprise funds, economic development funds, and other federal agencies. A small airport that is considering an airport improvement project that especially benefits one or more large users should consider asking those users for financial assistance in completing the project. Most often the funds from private corporations are used to help pay the airport owner's share of a state or federal-aid project. Many states and some local governments have set up enterprise funds. These funds are used pri- marily to attract new business to the state (or community) or to assist with the substantial expan- sion of an existing business as part of a competitive recruitment situation. An airport improvement project that plays a role in attracting new businesses or assisting existing businesses may qualify for enterprise funds. Some states have other similar-type grant programs that can be used for airport development projects that enhance economic development. Each program has different eligibility requirements and criteria, so an airport manager needs to research what is available in the area. Airports have received grants through programs offered by the U.S. Department of Homeland Security. This department improves the ability of states, local and tribal jurisdictions, and other regional authorities to prepare, prevent, and respond to terrorist attacks and other disasters by dis- tributing grant funds. Localities can use grants for planning, equipment, training, and exercise needs. These funds are usually administered and distributed by state offices of homeland security. Airport managers should check with their state homeland security office for grant opportunities. Current information on the location of the office in each state that administers the Homeland Security grants can be found on the U.S. Department of Homeland Security's website. Usually this office comes directly under the Office of the Governor. Items that may be eligible include security fencing, secu- rity training, security monitoring systems, and other equipment related to airport security. Capital Improvement Programming and Cash Management Cash management and coordination of cash flow is an important element in airport develop- ment. Because an airport owner can be required to pay out a significant amount of cash prior to being reimbursed, the owner should coordinate contractor and consultant pay requests with the state and the FAA (if applicable). To illustrate the cash flow considerations, typical funding, projected costs, and cash flow for an example project are discussed in the following paragraphs. In the example airport development project, the funding is obtained from federal and state grants with the following restrictions: Federal grant Bid prices must be provided with the grant application; 90% of eligible costs are reimbursed; and 10% of eligible costs are paid by local owner. State grant Design services can be funded by the grant; 60% of eligible costs are reimbursed; and 40% of eligible costs are paid by local owner. The local airport owner may seek federal reimbursement for design after the project is bid.

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26 Guidebook for Managing Small Airports Assumptions for the example project: 1. Assuming an eight-month design process, there will be four $20,000 invoices from the design consultant (billed bimonthly for a total of $80,000). 2. Assuming a 10-month construction schedule, there will be five $20,000 invoices from the design consultant for managing construction (billed bimonthly for a total of $100,000) and five $164,000 pay requests from the contractor (billed bimonthly for a total of $820,000). Figure 2 shows the local agency's share as a balance over the duration of the project. The over- all costs and reimbursements for the project are as follows: Month 1 The state grant is awarded for design, and the local agency begins with a $100,000 balance. Month 2 The consultant invoices $20,000, leaving the local agency with a balance of $80,000. Month 3 The local agency is reimbursed by the state for 60% of the consultant costs, bringing its balance up to $92,000. Month 4 The consultant invoices $20,000, leaving the local agency with $72,000. Month 5 The local agency is reimbursed by the state for 60% of the consultant costs, bringing its balance up to $84,000. Month 6 The consultant invoices $20,000, leaving the local agency with $64,000. Month 7 The local agency is reimbursed by the state for 60% of the consultant costs, bringing its balance up to $76,000. Month 8 The consultant invoices $20,000, leaving the local agency with $56,000. Month 9 The local agency is reimbursed by the state for 60% of the consultant costs, bringing its balance up to $68,000. Month 10 The design is complete, the project is bid, and the FAA awards the grant. The local agency is reimbursed by the FAA so that the total reimbursement is 90% $150,000 $100,000 $100,000 $92,000 $92,000 $80,000 $84,000 $72,000 $76,000 $73,600 $64,000 $68,000 $50,000 $56,000 $55,200 $36,800 $18,400 $0 $0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 ($50,000) ($100,000) ($92,000) ($110,400) ($128,800) ($150,000) ($147,200) ($165,600) ($200,000) L o c a l B a la n c e Figure 2. Local balance for a typical airport project.