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Suggested Citation:"Chapter 7 - Funding Alternatives." National Academies of Sciences, Engineering, and Medicine. 2009. Airports and the Newest Generation of General Aviation Aircraft, Volume 2: Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/14300.
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Page 65
Page 66
Suggested Citation:"Chapter 7 - Funding Alternatives." National Academies of Sciences, Engineering, and Medicine. 2009. Airports and the Newest Generation of General Aviation Aircraft, Volume 2: Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/14300.
×
Page 66
Page 67
Suggested Citation:"Chapter 7 - Funding Alternatives." National Academies of Sciences, Engineering, and Medicine. 2009. Airports and the Newest Generation of General Aviation Aircraft, Volume 2: Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/14300.
×
Page 67
Page 68
Suggested Citation:"Chapter 7 - Funding Alternatives." National Academies of Sciences, Engineering, and Medicine. 2009. Airports and the Newest Generation of General Aviation Aircraft, Volume 2: Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/14300.
×
Page 68

Below is the uncorrected machine-read text of this chapter, intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text of each book. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.

7.1 Introduction Many of the considerations addressed in this guidebook may require airport operators to make significant financial investments in infrastructure and/or facilities. But with the wide range of existing facilities, localized development considerations, and varying material costs around the country, it is not feasible to provide general cost guidance. Working with a local airport development professional is the best way to identify the costs that may be incurred for a specific airport. Developing a list of future desired airport projects to be ready for the new generation of GA aircraft is the easier part; funding the implementation may be more of a challenge. Several sources exist today that are being used for the development of airports, the most common being FAA grant monies. Overall, GA airports may have limited funding options unless they are part of a larger community or airport system. 7.2 Federal Grants FAA Airport Improvement Program (AIP) monies are the typical source of funding for airport development. The most recent AIP funding authorization, Vision 100—Century of Aviation Reauthorization Act, continued the non-primary baseline appropriation of $150,000 per year per airport that was established in Federal fiscal year 2001 by its predecessor Act, AIR-21, providing that the minimum appropriation was made by Congress. All GA and reliever airports included in the National Plan of Integrated Airport Systems (NPIAS), which is a Federal plan comprising more than 3,400 existing and proposed airports, are eligible for non-primary funding. GA airports may also be able to obtain AIP apportionment and discretionary funding by working with the FAA and State oversight agencies. The FAA uses a priority system to identify projects, with the highest priority being given to safety, security, and preservation of existing infrastructure. The existing AIP provides 95% of the funds at GA airports for eligible development projects with the remaining 5% coming from state grants and/or local funds. Eligible development projects typically are non-revenue-producing, although current legislation allows some revenue- producing projects to be funded, if all other airport needs are met. AIP funding is used for a range of projects as shown in Figure 7-1. The preparation of an Airport Capital Improvement Program (ACIP), which is a 5-year plan showing desired airport improvement projects, is the first step in documenting facility needs. Airspace and environmental approval is also required before a project is eligible for AIP funding. Airspace approval typically is accomplished through inclusion of the project on the airport’s approved Airport Layout Plan or other airspace approval process. Environmental approval 65 C H A P T E R 7 Funding Alternatives

is accomplished through the preparation of the necessary environmental documents to meet the requirements of the National Environmental Policy Act (NEPA). Environmental documents range from Categorical Exclusions to Environmental Assessments to Environmental Impact Statements. In addition to AIP funding for specific projects, funding from other government agencies may also be available (e.g., from the TSA for security improvements). 7.3 State Grants Many states support aviation development. The two most common forms of state funding are matching grants for AIP-funded projects or state-local grant programs that are not eligible for Federal funding. The level of state participation, eligibility of projects, and application process varies from state to state. Typically, the State DOT aviation department or office oversees any state aviation funding programs. 7.4 Airport Revenues Local funds for GA airports typically come from local airport revenues or the operating governmental entity for publicly owned airports. When a GA airport is part of a larger airport system, additional airport revenue funds may be available to support the overall system. The most common sources of airport-generated revenues at a GA airport are as follows: • Fuel sales or fuel flowage fees • Land and facility leases (such as building and hangar rents) • Tenant contract revenue (FBO, rental car, etc.) • Activity and usage fees (such as aircraft tie-downs) • Advertising revenues Whether these revenues flow to the airport owner or to a tenant depends on the contractual arrangement for services at the airport. When the revenues are less than the funds needed for the operation of the airport, the next source of funding usually comes from the airport owner or sponsor. This may include the relevant taxing authority through its governing body. 66 Airports and the Newest Generation of General Aviation Aircraft Reconstruction, 19% Security, 2% Safety, 4% New Airport, 3% Access, 4% Terminal, 18%Capacity, 17% Environmental, 5% Standards, 27% Source: FAA, National Plan of Integrated Airport Systems 2009-2013. Figure 7-1. NPIAS expenditures by project type.

Funding Alternatives 67 7.5 Bonds For significant capital improvement programs, another local funding option is the issuance of bonds. There are two basic types of bonds: general obligation and revenue bonds. 7.5.1 General Obligation Bonds General obligation bonds are secured by the full faith, credit, and taxing authority of the issu- ing government agency. General obligation bonds are instruments of credit and, because of the government guarantee, the interest rate that must be paid to the bondholders is reduced. This type of bond uses tax revenues to retire the debt and a key element is usually the approval of the electorate of a tax levy to support airport development. Government entities generally have limits established for the maximum level of indebtedness that can be assumed. 7.5.2 Revenue Bonds Another type of bond is an airport revenue bond, which is secured only by the revenues of the airport. Revenue bonds are retired solely from the revenue of a particular project or from the operating income of the issuing agency. Generally, they fall outside the statutory limitation on public indebtedness and in many cases do not require voter approval. Revenue bonds normally carry a higher interest rate because they lack the security of general obligation bonds. An additional challenge is that revenue bonds usually require a large reserve if there are no firm guarantees. Often it is required that the net income (total revenue less maintenance and operating expenses) available for debt service must be at least 1.25 to 1.5 times the annual debt service. This money must be put in a fund to be used only for payment of the bond’s principal and interest if net revenues in any particular year are not sufficient to meet these payments. It is possible to mix the benefits of a general obligation bond with some of the advantages of a rev- enue bond. When this is done, it is generally intended that the bond will be retired from revenues, as is the case with a true revenue bond. However, if the revenues would not be enough to meet all debt service payment, the community’s tax base would have to make up the difference. Some states also have bond banks or another form of pooled credit through which smaller projects can be combined for bond issuance. Where bond banks exist, there is a potential to lower the costs of initiating a bond. 7.6 Private Investment If a project is intended to serve a specific corporate user, in some cases it may be possible to obtain support from the corporate users of the facility. Although corporate support may not cover the full cost or full local share, it can contribute to the overall funding, while delivering a strong message about the importance of the improvement. Some airport operators have successfully used bank financing for obtaining airport develop- ment capital. Generally two conditions are required to obtain bank financing: the airport must demonstrate the ability to repay the loan at current interest rates, and the capital improvement must be less than the value of the facility. Another important source for development funding is the private sector. There are many areas in which private development can occur at an airport. In these cases, typically the airport owner grants the developer a land lease and the private developer provides the funding to construct the improvement. Private-sector funding typically is associated with revenue-producing development rather than airfield infrastructure.

7.7 Privatization Most airports in the United States are operated as not-for-profit entities with oversight by a politically appointed or governmental agency. Privatization can refer to a broad range of activities that entail varying levels of private involvement in the operations of an airport, ranging from partial to full privatization. 7.8 Summary Although there are a number of potential revenue sources, identifying the appropriate one for a specific airport requires coordination with the relevant governmental oversight agencies. The purpose of the project and the airport revenues also affect the potential revenue sources. Airport funding is best identified as part of a longer term capital improvement program developed in conjunction with the airport’s budget. 7.9 Helpful References and Resources ACRP Synthesis 1 Innovative Finance and Alternative Sources of Revenue for Airports, http://onlinepubs.trb.org/ onlinepubs/acrp/acrp_syn_001.pdf. This synthesis provides an 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. FAA, Airport Improvement Program Handbook, http://www.faa.gov/airports_airtraffic/airports/aip/aip_handbook/. This handbook provides guidance and sets forth policy and procedures on how the FAA is to administer the Airport Improvement Program (AIP). AIP is a grant program for airport planning and development projects available to airports within the National Plan of Integrated Airport Systems (NPIAS). FAA Order 5190.6A, Airport Compliance Requirements, http://www.faa.gov/airports_airtraffic/airports/resources/ publications/orders/media/Obligations_5190_6a.pdf. This order provides policies and procedures related to airport compliance with obligations under FAA grant programs. 68 Airports and the Newest Generation of General Aviation Aircraft

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TRB’s Airport Cooperative Research Program (ACRP) Report 17: Airports and the Newest Generation of General Aviation Aircraft, Volume 2: Guidebook is designed to help airport operators assess the practical requirements and innovative approaches that may be needed to accommodate these new aircraft. ACRP Report 17, Volume 1 explores a forecast of anticipated fleet activity associated with the newest generation of general aviation aircraft for 5- and 10-year outlooks.

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