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Plan of Finance and Financial Feasibility 51 CASE STUDY 1 Bus Service to Intermodal Terminal Boston, Massachusetts: Silver Line bus rapid transit service between South Station in downtown Boston and Logan International Airport Capital Funding: Massachusetts Bay Transportation Authority (MBTA)(local transit); FTA (buses); and Massport (buses) Operating Costs: Fare box and Massport (Airport Revenue) In June 2005, bus rapid transit service was introduced between Boston Logan International Airport and South Station. South Station is located 4 miles from Logan Airport. It was built in 1899 as a rail station and has transformed over the years into an intermodal center serving Amtrak, Massachusetts Bay Commuter Rail, intra-city bus, and inter-city bus (Greyhound and Peter Pan) operations. As a mixed-use development, it features dining and retail in addition to the multi- modal transportation services. In an effort to meet a stated agency goal of achieving 35.2% HOV ground access to the airport, Massport partnered with the MBTA to develop the Silver Line Route 1 (SL1). Most of the infrastructure and development costs were paid for with MBTA and FTA (Section 5307 and Section 5309) funds. Massport contributed $13.3 million in capital funds to purchase eight low-emissions buses. The 60-ft articulated dual-mode buses run on low- sulfur diesel when on roads and on electricity while in the tunnel and are able to use the 600-volt overhead system. The Silver Line buses serving the airport are identified by the Massport logo on their exterior. MBTA staff at South Station direct airport passengers to the appropriate SL1 route. Internally the buses are uniquely configured with luggage racks. Mass- port contributes approximately $2 million annually towards operating expenses and receives the fare revenues for all passengers who originate at Logan Airport. Massport has been pleased with the publics' use of SL1. As of September 2007, ridership averages 3,500 daily boardings, which includes air passengers and air- port employees. Federal Funding Sources Because offsite terminals take many forms and connect to airports in various ways, the plans for financing the capital and operating costs of a terminal and its airport transportation link will vary considerably. Among the most important variables are the location of a terminal, the types of trans- portation connections to the airport, and the passenger processing functions performed.(3) Given the importance of funding to the project's feasibility, all possible sources of federal and local funds should be identified early on in the project development process. Federal grant funds are available for transportation projects, but, because these sources are modally based, there are strict rules about the ways in which these monies can support multimodal projects such as access from an offsite terminal to an airport. Additional rules govern eligibility for federal capital grants, the use of passenger facility charge (PFC) revenue, as well as revenue generated on the airport. All are governed by federal laws, reg- ulations, and existing contracts that require careful consideration and consultation with appro- priate agencies when planning an offsite terminal and transportation service. Together with any

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52 Planning for Offsite Airport Terminals operating revenue generated by services offered at the offsite terminal or through the transporta- tion link, these sources of revenue provide the resources to back the capital and operating costs of the operation. Federal Planning Grants To the extent individual offsite terminal projects can be made part of overall airport and regional planning, it is likely to increase the potential for planning support and capital funding assistance. At the FAA, the Airport Planning and Programming Office (APP) administers the airport planning process and provides financial assistance to airport sponsors to complete indi- vidual airport master plans and area-wide system plans. These funds amount to approximately $70 million annually, which is about 2% of overall FAA capital grants made available to airports for all planning. Among the items eligible, as part of these comprehensive efforts, are "airport coordination and the analysis of procedures for transfer of passengers or baggage to bus, van, taxicab, rental car, automobile parking as well as innovative access facilities."(4) Questions about the planning process and funding should be directed to the appropriate FAA Airport Dis- trict Office. Federal Grants: FAA's Airport Improvement Program The FAA provides approximately $3.5 billion in federal capital grants to airports under the Air- port Improvement Program (AIP), approves airport sponsor PFC applications, and oversees the use of aeronautical and non-aeronautical revenue collected and spent by airports. The AIP pro- gram is funded by aviation-user taxes. AIP grants are made available to airports through two meth- ods: (1) entitlement funds, which are apportioned to airports based on levels of passenger traffic and landed weight (for the cargo entitlement funds); and (2) discretionary funds, which are dis- tributed based on a proposed project's ranking in relation to other projects deemed most impor- tant for improving the national air transportation system. When an airport accepts AIP grant funds, it agrees to abide by a number of sponsor assurances and grant certifications that specifically guide how the airport manages not only the grant funds, but also the airport's other sources of aeronautical and non-aeronautical revenue. At the heart of the grant assurances is a requirement that airports use revenue on "the capital or operating costs of the airport; the local airport system; or other local facilities which are owned and operated by the owner or operator of the airport." This requirement--to not illegally divert revenue from the airport for a non-aviation and/or non-airport purpose--limits the use of airport revenue for off- site terminal projects that cross the airport's boundary. For a full list of grant assurances and other requirements, see The federal share of projects depends on the hub classification of the airport sponsor. Large- and medium-hub projects are generally funded at a 75% federal share, while small hubs and smaller airports are generally funded at a 90% or 95% federal share. The FAA places a priority on airside and terminal needs projects. An offsite terminal would be AIP eligible if it meets the following criteria: Is On-Airport: AIP projects normally must be located entirely within the airport boundary or within a right-of-way acquired by the airport (the airport sponsor must retain and control ownership of any right-of-way for the life of the project). Within this criterion, however, there may be flexibility for an offsite and off-airport property terminal if it is owned (or leased long- term) by the airport and exclusively provides passenger processing functions. Especially for projects in this area, interested sponsors should work with the FAA regarding any questions about eligibility.

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Plan of Finance and Financial Feasibility 53 Serves Airport Traffic: AIP eligible projects must exclusively serve airport traffic. The FAA has interpreted this to mean that only "incidental use" by non-airport users is permitted. This typ- ically requires that for any projects within a multi-modal or multi-use building, airports must build into the project's design the ability to separate airport traffic from non-airport traffic. Retains Ownership: The airport must retain ownership of the completed project, although it may lease the responsibility for operating a ground transportation service to a local or regional agency. Terminal development projects are eligible for AIP funds only for public, non-revenue- producing areas that are directly related to the movement of passengers and baggage. Large-, medium-, and small-hub airports are also restricted to the use of entitlement funds, not discre- tionary, for terminal development. Eligible items include baggage-claim delivery areas, automated baggage-handling equipment, public-use corridors to boarding areas, central waiting rooms, rest- rooms, holding areas, and foyers and entryways.(5) The FAA recommends that its Airport Finan- cial Assistance office be consulted prior to any programming work on a multimodal terminal build- ing. In the case of any offsite terminal building, this is especially advisable given the complexities of issues involved in seeking eligibility. On-airport transit systems (e.g., automated people movers, buses, and rail systems) are also eligible for AIP funding. These include both the system itself (e.g., the vehicles, track, and oper- ational controls for the system) and the stations. Eligibility is limited to the portions of a system designed for passenger access; all other uses, such as use by employees, would require a pro- ration of eligible costs. If an on-airport station is part of a larger transit system and is not at the "end of the line"-- meaning non-airport passengers pass through the airport--the "through portions" of the station would be ineligible for AIP. Those portions of the station that are connected exclusively to the air- port (e.g., by a walkway) would be eligible. Case Study 2 provides an example of the airport, the MPO, and other local agencies working together to fund an integrated transit link to the airport. Federal Grants: TSA Programs Beginning in Fiscal Year 2009 (October 1, 2008), the Department of Homeland Security's TSA has grant monies available to help airport sponsors with the costs of screening checked baggage. Legislation was passed as part of P.L. 110-53, "Implementing Recommendations of the 9/11 Commission Act of 2007." Specifically, Congress has provided $250 million annually through 2028 ($5 billion) to help defray costs related to the installation of "in-line" baggage systems at airports. While the vast majority of this funding will likely be dedicated to security costs at on- airport passenger terminals, off-site terminals that envision a full array of passenger processing functions, including ticketing and checked baggage, could be eligible. Interested airports are advised to discuss the matter with their local TSA Federal Security Director, the coordinator of federal security at the nation's airports. Federal Grants: FTA Programs The federal surface transportation programs from 2005 through 2009 are authorized under SAFETEA-LU. FTA's approximate $9.3 billion of funded programs range from those that provide substantial capital support for "transit systems," including bus and fixed-guideway projects (i.e., commuter and light rail), as well as support for clean fuel buses, the transportation needs of the dis- abled and elderly, and operational support for smaller transit systems. In all cases, coordinating the planning of a project with FTA Regional Offices, MPOs, and/or state DOTs is necessary to qualify for funding. Specific funding sources include Section 5307, "Urbanized Area Formula Program"; Section 5308, "Clean Fuel Grants Program"; Section 5309, "Capital Program"; and several other smaller programs. Section 5307 provides formula grants made available to urbanized areas. An

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54 Planning for Offsite Airport Terminals CASE STUDY 2 Integrated Transit System Link to Airport Portland, Oregon: Light-rail transportation service from downtown Portland to Portland International Airport (Airport Max) Capital Funding: TriMet ($46 million); City of Portland ($23 million); Cascades Council of Governments ($28 million); and Port of Portland ($28 million) Operating Costs: Fare box and TriMet On September 10, 2001, light-rail service along a 5.5-mile extension of Portland's existing 33-mile light-rail system began between downtown Portland and Port- land International Airport. The $125 million project was a collaborative effort among local governments including TriMet (the local public transit operator); the City of Portland; the Cascades Council of Governments; and the Port of Portland (the airport operator). In addition, the airport engaged a developer, Bechtel, in a public-private partnership where the airport acquired 120 acres of land and leased it back to Bechtel exclusively for 85 years. This acquisition pro- vided additional airport land for the light-rail operation and allowed the airport operator to fund its $28 million share of the project with PFCs and airport rev- enue for the on-airport portion of the light-rail line. The project also received $46 million from TriMet, $23 million from the City of Portland, and $28 million from the Cascades. Critical to the Airport Max project was the local committee set up to coordinate action among the various local and state agencies. Included on the committee was Portland's Mayor; the City Transportation Commissioner; TriMet; the Port Director (airport); the Director of the Oregon DOT; and MetroExecutive, the regional MPO. The project has provided a successful alternative to congested roadways, enabling passengers to use transit between the airport and downtown Portland. Because the airport link is part of a larger transit operation, traffic is aggregated from several regions throughout the Portland area. On average, approximately 5% of O/D passengers are using the service, slightly above initial estimates. urbanized area is an incorporated community with a population of 50,000 or more. For urbanized areas of more than 200,000, grants are distributed directly to the recipient. For those of fewer than 200,000, funds are distributed to governors to allocate according to the individual state's process. Capital programs are generally funded with an 80% federal share, but FTA policy favors those projects that are more highly leveraged (i.e., requiring a lower federal commitment). Limited operating assistance is available for urbanized areas under 200,000. Generally, however, the focus of FTA funding is on capital projects. Advocates of airport access projects, either standalone systems or those that are part of larger transit systems, would work through their local MPO and state DOT to apply for funding. Projects that are part of the transportation link for an offsite terminal would generally fall under Section 5307 (a formula-based program) or 5309 (a discretionary program). In addition to the projects listed above, intermodal stations and park-and-ride stations are eligible for funding. In recent years, Congress has earmarked all available funding for the program, meaning that project proponents should contact their local member of Congress in addition to their MPOs and local FTA office.