Planning for Offsite Airport Terminals (2010)

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50 The typical steps required to obtain funding and any necessary financing for projects are 1. Plan the project in coordination with other government agencies, considering how the off- site terminal and transportation link may fit with local and regional transportation goals in addition to the airport-related goals of the project sponsor; 2. Determine whether any capital grants or operating assistance is available for the service; 3. Calculate the revenues generated from any offsite terminal and the connecting transporta- tion service (as described in Chapter 5); and 4. Assemble the final financial plan. State and Local Coordination/Funds The offsite terminal planning process should start with airport sponsors working with other state and local officials, as well as local offices of federal agencies through the Metropolitan Plan- ning Organization (MPO). It is a current policy of the U.S. DOT “to encourage the develop- ment of intermodal connections on airport property between aeronautical and other trans- portation modes and systems to serve air transportation passengers and cargo efficiently and effectively and promote economic development.”(1) See Case Study 1 for an example of an inter- modal terminal. Airports may be eligible for intermodal planning assistance through monies made avail- able to MPOs through the FHWA and FTA planning programs. These funds require that the access project be part of the local Transportation Improvement Program; with its inclu- sion, the project approval process, including required environmental reviews, is streamlined considerably. These goals will be best achieved if airport officials and the local MPO or state DOT coor- dinate their planning, including demand forecasts, environmental impacts, land use, and air- port access connections.(2) Through this coordination, airports are also more likely to be made aware of the full range of federal capital, operating, and credit assistance available through FHWA and FTA. Decisions regarding the use of FHWA and FTA funds are most often made at the MPO and state level; FHWA and FTA provide final approval for the proj- ects selected at the local level. States can also provide access to financing such as the Florida State Infrastructure Bank (SIB) loan being used for a segment of the funding for the Miami Intermodal Center. C H A P T E R 6 Plan of Finance and Financial Feasibility

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

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 www.faa.gov/airports_airtraffic/airports/aip/grant_assurances/. 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. 52 Planning for Offsite Airport Terminals

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

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. 54 Planning for Offsite Airport Terminals 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.

Plan of Finance and Financial Feasibility 55 Federal Grants: Congestion Mitigation and Air Quality Improvement Program The Congestion Mitigation and Air Quality Improvement Program (CMAQ) is a program within SAFETEA-LU that focuses on reducing tailpipe emissions of ozone and carbon monox- ide. Jointly administered by FHWA and FTA, funding is available to metropolitan areas that do not comply with federal air quality standards (non-attainment areas) or previously did not com- ply but do so today (maintenance areas). Priority for CMAQ funds are given to diesel engine retrofits and other effective emission-reduction and congestion-management activities. CMAQ opportunities should be considered for possible funding of the transportation link between an off-site terminal and the airport. Information on nonattainment and maintenance areas can be found at www.epa.gov/oar/oaqps/greenbk/ancl.html. The inter-agency coordination recommended previously is especially important if CMAQ funds are to be obtained. While CMAQ funds are administered by FHWA and FTA and these agencies make the final determination of eligibility, the actual project selection is made by either the state or local MPO, according to the state and/or local planning process. CMAQ funds may be used for capital needs such as to establish new or expand existing trans- portation projects. CMAQ also makes limited and temporary operating assistance available to new transit services and intermodal facilities. Transit facilities must be associated with new or enhanced mass transit services to be eligible. Activities such as fringe parking are eligible if they are explicitly aimed at reducing single-occupancy-vehicle travel and the associated emissions. Fringe parking is used by cities to reduce downtown congestion by building spaces on the “fringe” or edge of downtown and then using mass transit to move travelers within the down- town area. As such, a multimodal transportation center that provided airport access would be a candidate for CMAQ funding. Local Funding Sources Passenger Facility Charges In 1990, Congress enacted legislation to provide airports with an additional source of local funding for capital projects, subject to FAA approval, in the form of PFCs. The Aviation Safety and Capacity Expansion Act of 1990 required the U.S. DOT to issue regulations under which a public agency may be authorized to impose a PFC of $1.00, $2.00, or $3.00 per enplaned passen- ger at commercial airports it controls. Under this act, eligible airport-related projects are those that preserve or enhance safety, capacity, or security of the national air transportation system; reduce noise from an airport that is part of the system; or furnish opportunities for enhanced competition between or among air carriers. The Wendell H. Ford Aviation Investment and Reform Act for the 21st Century (AIR-21) included authorization for a public agency to charge a PFC at the $4.00 and $4.50 levels if the projects meet specific eligibility requirements. One such requirement, which applies only to large- and medium-hub airports, is that a project must make a “significant contribution” to improving air safety and security, increasing competition, reducing congestion, or reducing noise (in comparison to the “adequate justification” requirement for projects at a lower level). For operators of large- and medium-hub airports that are approved to collect a $4.00 or $4.50 PFC, passenger entitlement grants are reduced by 75% (rather than the 50% associated with lower PFC levels). Currently, more than $2.2 billion in PFC revenues are collected by airport operators. PFC rev- enues are (1) used on a “pay-as-you-go” basis, where PFC collections and interest earnings are

spent directly on capital projects and/or (2) leveraged, that is, used to pay debt service on bonds or to repay other forms of debt. Sponsors must follow FAA regulations when allocating PFC revenue to project costs. All PFC projects must meet the AIP criteria presented above. Additionally, there are separate PFC eligi- bility requirements that must be met. A project like an offsite terminal is something that the FAA encourages PFC applicants to develop in coordination with appropriate local and regional trans- portation agencies in order to ensure that all possible sources of funding are explored prior to assessing air travelers a fee for ground transportation projects. The specific eligibility require- ments for an airport to use PFCs for an offsite terminal project include • Project lead: The airport sponsor must be the final authority on a project that may involve other local agencies. This requirement ensures that the imposition of a PFC is not regulated by an agency other than the airport. • PFC eligibility: The project must meet one of the PFC program objectives. The objectives are – Preserving or enhancing the safety, capacity, or security of the national air transportation system; – Reducing noise or mitigating noise impacts resulting from an airport that is part of such system; or – Furnishing opportunities for enhanced competition between or among air carriers. The eligibility of an offsite terminal could possibly be established by citing projected improve- ments in the capacity of the national air transportation system. An offsite terminal might also be justified through the capacity enhancements it provides for the airport. For example, a space-constrained airport may realize gains in capacity and efficiency if a certain amount of baggage screening and sorting is moved to the offsite terminal. In addition, the reduction in low-occupancy vehicles on-airport due to use of the offsite terminal will improve traffic flows on terminal roadways and curb areas, potentially alleviating the need for roadway and curb expansion. • Significant contribution for $4.50 PFC at large or medium hubs: The project must demon- strate that it makes a significant contribution to – Improving air safety and security; – Increasing competition among carriers; – Reducing current or anticipated congestion; or – Reducing the impact of aviation noise on people living near the airport. Terminal space con- straints are also likely to be contributing factors to this justification—for example, moving functions to an offsite terminal may provide the space necessary to build extra gates that could be used by an airline new to the airport. While this test looks similar to that listed above, it is more stringent and there can be greater variations in how FAA offices apply the criteria. Reducing congestion is the usual route that airports attempt in order to meet the significant contribution test. In determining whether an airport would meet the test, FAA considers the following questions: – Does the project support or is it a part of a capacity project to which the FAA has allocated federal resources or that would qualify for such resources? – Is the project included in an AIP Letter of Intent or does it satisfy the FAA’s benefit-cost criteria for large AIP discretionary investments? – Has the project been identified as an important item in an FAA Airport Capacity Enhance- ment Plan? or – Does the project alleviate an important constraint on airport growth or service? • Adequate justification: The program must be adequately justified. Showing reduced tra- vel times directly for potential passengers and showing the reduced travel times for those using congested roadways relative to the cost of the project are two strategies for justifying a project. 56 Planning for Offsite Airport Terminals

Plan of Finance and Financial Feasibility 57 • Airside needs test (for $4.50 PFC): The airport must show that it has made adequate provi- sions for financing the airside needs of the airport (including runways, taxiways, aprons, and gates). The FAA typically reviews planning and inspection documents to determine the airside needs, comparing them with the airport’s capital plan. • AIP funding test (for $4.50 PFC): The test requires that the FAA make a finding that the proj- ect cannot be paid for from AIP funds reasonably expected to be made available for the airport. The House version (HR 2881) of the FAA reauthorization bill pending before Congress (as of December 2007) has a provision, Section 114, “Intermodal Ground Access Project Pilot Pro- gram,” that would provide additional eligibility for ground access projects at up to five airports. Unlike current law that restricts the use of PFC revenues to projects that serve airport traffic exclusively, airports would be able to use a pro-rated share of PFC revenues based on the over- all share of airport traffic served by the access project. For example, if an airport station was part of a larger transit system with 70% of riders being through-passengers and 30% airport traffic, 30% of the facility or infrastructure’s capital costs that are on-airport would be PFC eligible. Airport Bonds and Airport Revenue Airport operators are major and regular participants in the municipal bond markets. At medium- and large-hub airports, airport revenue bond proceeds constitute the most signifi- cant source of funding, accounting for 58% of total funding for airport capital projects. (6) Major investor services use rating systems to grade bonds according to investment quality to inform potential investors about the creditworthiness of specific types of bonds at specific airports. The three major credit rating agencies—Moody’s Investors Service, Fitch Ratings, and Standard & Poor’s—have concluded that, on the whole, the airport system has performed well. It would be likely that the financing plan for an offsite terminal would involve some form of bonds issuance. Airport Bonds Airport revenue and PFC revenues are the most common sources used to back airport bonds. Five basic types of bonds are issued to fund airport capital improvements, including • General obligation bonds supported by the overall tax base of the issuing entity (the airport sponsor); • General airport revenue bonds (GARBs) secured by the revenues of the airport and other rev- enues as may be defined in the bond indenture; • Bonds backed either solely by PFC revenues or by PFC revenues and airport revenues gener- ated by rentals, fees, and charges; • Special facility bonds backed solely by revenues from a facility constructed with proceeds of those bonds; and • Other debt instruments. Airport Revenue Especially at larger airports, the majority of capital projects use airport revenue as their source of funding. This revenue is generated by the use of airport facilities (e.g., runways, terminals, parking lots, concessions) and by airlines, passengers, and others using the airport. The use of all airport revenue is governed by sponsor assurances that accompany the receipt of federal grant money (AIP) by the airport.(7) The set of rules for the use of revenue is quite similar to those enumerated above for AIP grants and PFC revenues. The FAA has approved the use of airport rev- enue for airport stations and the connections between the airport and the nearest mass transit line provided that they are located entirely on airport property and are designed for the exclusive use of airport passengers.

These rules do not restrict the use of bus connections to airports such as the LAX Flyaway non- stop bus routes operated by LAWA and the Logan Express non-stop bus routes operated by Mass- port. Manchester Boston Regional Airport runs a complimentary shuttle with stops in Woburn and Boston. The shuttle services the airport and is subsidized through the use of revenue generated by the airport. To protect against non-airport passengers utilizing the service, airport passengers must show a boarding pass or a printed travel itinerary as they board the shuttle. As long as the buses are used exclusively for airport service, capital and operating costs are eligible uses of airport revenue. Customer Facility Charge Bonds Customer facility charges (CFCs) are collected through rental car concessionaires and may be assessed on a per transaction basis or per transaction-day basis. CFCs are usually established pur- suant to an ordinance that establishes the CFC amount, and the CFC may thereafter be part of the airport’s annual setting of rates and charges. Airport operators have a good deal of discretion in setting and charging CFC fees since there is no requirement for federal oversight or approval of the CFC or transportation fee. Traditionally CFCs have been levied to pay all or a portion of the operating and capital costs of a consolidated rental car area or structured facility. CFCs may also include the costs of transportation to the terminals. If a rental car facility were to be part of the offsite terminal, CFC bonds, backed by future CFC revenues, are the types of bonds most likely to be used to finance that portion of an offsite terminal project. CFC revenues may be used on a standalone basis to leverage bonds or may be used together with other airport revenues to sup- port bonds (known as a “double-barreled bond”). Federal and State Credit Assistance An offsite terminal may have access to other credit assistance beyond that which is normally available for airport projects. The roadway congestion relief that would potentially be realized due to the offsite terminal may make the project eligible for programs meant to facilitate devel- opment of surface transportation projects at the federal and state levels such as the TIFIA and airport access projects and state-based credit assistance programs. TIFIA and Airport Access Projects The Transportation Infrastructure Finance and Innovation Act (TIFIA), created as part of TEA-21 in 1998, allows the U.S. DOT to provide direct credit assistance to sponsors of major transportation projects. TIFIA has been reauthorized under SAFETEA-LU, which is the federal act signed into law in 2005 that continues transportation funding for the next 6 years. The TIFIA credit program offers public and private sponsors of large surface transportation projects three distinct types of financial assistance: direct loans, loan guarantees, and standby lines of credit. To be eligible for TIFIA, the project must be included in a State Transportation Plan and before an agreement is made for federal credit assistance, the project must be in an approved State Trans- portation Improvement Program. Requirements to access the TIFIA credit program include • The entity undertaking the project must submit a project application; • A credit rating or preliminary opinion letter from a rating agency indicating that the project’s sen- ior debt obligations have the potential of being investment grade is required with the application; • Eligible project costs must equal or exceed the lesser of $100 million or 50% of the amount of federal-aid highway funds apportioned to the state for the most recently completed fiscal year; • Project financing must be repayable in part or in whole from tolls, user fees, or other dedi- cated revenue sources; and 58 Planning for Offsite Airport Terminals

Plan of Finance and Financial Feasibility 59 • If the project is not undertaken by a state or local government or an agency or instrumental- ity of a state or local government, the project still must be included in both the State Trans- portation Plan and an approved State Transportation Improvement Plan. TIFIA credit assistance, backed by a regional gas tax and rental car fees, helped to complete the financing for a $1.3 billion Miami Intermodal Center designed to improve access to and within Miami International Airport.(8) State-Based Credit Assistance Programs Several programs are state-directed programs enabled through federal-aid funding. As with any TIFIA project, the best point of contact is the state’s DOT. State Infrastructure Bank The National Highway System Designation Act of 1995 (the NHS Act) enabled states to cap- italize transportation credit assistance banks modeled after wastewater State Revolving Loan Funds. The SIB program provides loans, credit enhancement, and other forms of assistance (such as bond banks) to eligible surface transportation projects. Thirty-nine states participated in the NHS Act pilot. SAFETEA-LU established a new SIB program, authorizing all states, Puerto Rico, the District of Columbia, American Samoa, Guam, the Virgin Islands, and the Commonwealth of the Northern Mariana Islands to enter into cooperative agreements with the U.S. DOT Sec- retary. After entering into a cooperative agreement, they could then establish infrastructure revolving funds eligible for capitalization with federal transportation funds authorized for fiscal years 2005–2009. Since program implementation and capitalization levels vary from state to state, the best source of information about SIB assistance is each state’s DOT. Section 129 Loan Section 129 loans allow states to use regular federal-aid highway apportionments (annual fund- ing allocations) to fund loans for projects with dedicated revenue streams. A state may directly lend federal-aid highway funds to toll and non-toll projects that must have a pledge of a dedicated repay- ment source to secure the loan. Section 129 loans must be paid beginning 5 years after construc- tion is completed and must be completed within 30 years of the date federal funds were authorized for the loan. States have the flexibility to negotiate interest rates and other terms for these loans. Mixed-Use Developments and Intermodal Centers A mixed-use development typically provides a number of aviation and other transportation services that use a variety of public and private sources of funding. While the rules governing air- ports’ use of grant monies, PFCs, and airport revenue make this a potentially challenging endeavor, the aggregation of potential airport customers at an offsite location establishes a larger market for an airport access project. In this type of development, the airport and its passengers account for only a portion of the center’s overall usage. As such, airport grant funds and airport revenue may only pay for the specific components of the center that exclusively serve airport passengers. Exam- ples of a mixed-use development include an intermodal transportation center; a development in partnership with one or more airlines; or a development in conjunction with the private sector, referred to as a public-private partnership. While the enlarged scope of these projects may be rel- atively costly compared with a standalone airport access project, the multiple purposes of the facil- ity can generate more customers, as well as potential sources of non-aviation revenue, to fund the project. A good overview of available funds for intermodal projects in general can be found in “Intermodal Transportation: DOT Could Take Further Action to Address Intermodal Barriers.”(9) Case Study 3 is an example of a mixed-use development at the off-airport station.

60 Planning for Offsite Airport Terminals CASE STUDY 3 Consolidated Intermodal Transfer Center with People-Mover Connection to Airport When completed, the MIC is expected to reduce con- gestion on the surrounding highways and the access roads to the terminal. Current estimates are that 30% of current vehicular traffic will be eliminated when the MIA Mover becomes operational. Seventy- five thousand passengers are expected to use the MIC on a daily basis, and 60%of total MIC passengers (45,000) will continue on the MIA Mover to the ter- minal (these estimates include airport employees). The project includes a joint development component made up of a public and private ground lease pro- gram. The joint development leases are expected to help offset the facility’s capital and operating costs and may include hotel, office, retail, and restaurant space. The MIC has been designated a “major project” by the federal government and is receiving more direct financing coordination and oversight from FHWA than would a typical project. Many partners are involved in this large and complex project, requiring a great deal of coordination. The following are the major funding sources for the MIC, as described on the project web- site, www.mic.dot.com, in November, 2007: • Federal TIFIA loans; • Miami-Dade County/MDAD contributions; • Transportation funding prioritized by the MPO; • Miami-Dade Expressway Authority; • Private-sector contributions; • CFCs paid by rental car customers; • Lease revenues paid through extended possession leases on property already acquired; • Contingent rent to be paid by rental car companies, if necessary; and • FDOT SIB loan. If the MIC were to be completed on a pay-as-you-go basis, it would take at least 10 years to complete just Phase 1, based on the funding commitments of the State of Florida, Miami-Dade County MPO and Miami-Dade County. TIFIA loans have allowed the project to be accelerated by at least 5 years. • Miami, Florida: Miami Intermodal Center (MIC), which includes a consolidated rental car facility and 1.45 million sq. ft of developable space (office, hotel, retail, parking) • Capital Funding, Phase 1: – FHWA grants ($165 million) – Florida DOT (FDOT) state funds (over $386 million) – Florida SIB loan ($25 million) – Miami-Dade Expressway Authority ($87 million in toll-backed financing, plus $18 million from Florida’s SIB for the SR 836/ SR112 connector) – Miami-Dade Aviation Department ($400 mil- lion for the MIA–MIC connector. Funding source–airport user fees) The MIC is to be completed in 2011 and will be a transfer point to Miami International Airport (MIA) and other destinations for various rail systems (inter- city and commuter); buses (local and intercity); rapid transit; taxis; cruise ships; rental cars; and privately owned vehicles. The MIC is located adjacent to MIA property and will be served by dual light-rail people- movers (i.e., the MIA Mover) that span 1.25 miles. The construction of the MIA Mover is being funded in part by airport revenue, flowing through the Miami-Dade Aviation Department’s Capital Improve- ment Plan. A station on the third level of the MIA terminal will connect the MIA Mover to the termi- nal’s automated walkways. The MIA Mover station at the MIC will be located at the fourth level of the Rental Car Center (RCC) between the RCC’s Customer Service Lobby and the Miami Central Station, via an elevated pedestrian walkway. The rental car companies that serve MIA will operate from a consolidated RCC at the MIC. The RCC is being funded through a TIFIA loan, as well as CFCs currently collected on all rental car transactions originating at MIA. The rental car shuttles that serve the airport will cease service once the RCC is operational—the MIA Mover will connect all rental car customers to the RCC.

Plan of Finance and Financial Feasibility 61 Summary of Funding Sources Table 14 summarizes the funding sources described in this chapter that may be available for an offsite terminal and airport transportation link. The project sponsor should also research fund- ing opportunities that may be available in the specific market area in which the airport or offsite terminal is located such as through state, county, or municipal funding sources. Case Study 4 pres- ents a hypothetical example of an approach to researching funding sources for an offsite terminal with a bus link to the airport. Table 14. Potential funding sources, offsite terminal and airport transportation link. Project Type Federal and/or Local Agency Program Description/Eligibility Agency Contact(s) Planning FAA Airport ma ster plans and area-wide syste m plans. FAA Office of Planning and Programming and Airport District Office Planning FHWA and FTA Projects coordinated through MPOs (areas greater than 50,000 population) and state DOTs (less than 50,000 population). MPOs and state DOTs Capital: on-airport portions of project FAA “On-airport” transportation and facilities that serve airport passengers. AIP: priority for grants for airside and terminal needs. PFCs: use if significant impact on aviation system capacity and congestion reduction. Airport revenue: eligible. FAA Airport Financial Assistance Office for intermodal projects involving off-airport links. FAA Airport District Office for financial eligibility Operating: on-airport portions of project FAA Airport revenue ma y be used to support operations of the on-airport m ovem ent of passengers and other operational costs. Off- airport bus routes permitted if service exclusively serves airport passengers. FAA Airport District Office Capital: off-airport solutions with passenger processing TSA Checked baggage-screening projects that result in more efficient and secure operations. TSA Federal Security Director responsible for airport Capital: multi-use facilities with rental car operations FAA CFCs: Fees on rental car users that can be leveraged to construct facilities. FAA Airport District Office Capital: transit vehicles and facilities FTA and FHWA (MPOs and state DOTs) Public transportation buses and fixed- guideway transit projects, including those that are part of regional system s. Non-attain me nt and ma intenance areas eligible for CMAQ m onies that provi de air quality benefits. FTA Regional Office and MPO/state DOT Operating: transit service FTA Lim ited operating assistance available to urbanized areas less than 200,000 in population. FTA Regional Office and MPO/state DOT Federal and state credit assistance FHWA and state DOTs TIFIA: Loans and lines of credit available for major transportation projects. SIBs: credit assistance available for eligible surface transportation projects. FHWA Resource Centers and state DOTs Source: Jacobs Consultancy

62 Planning for Offsite Airport Terminals CASE STUDY 4 Hypothetical Scenario of Possible Funding Sources for an Offsite Terminal with Connecting Bus Service to the Airport be to coordinate with the regional MPO. Funding for the required planning studies could be requested from the FAA’s Airport Planning and Programming Office. The FAA’s Airport Financial Assistance office would also need to be consulted early in the project devel- opment stages in order to review airport revenue and AIP and PFC funding eligibility. The primary question would be whether the lease the airport operator holds to the offsite terminal is of a duration and security level such that the FAA would consider the on-airport and ownership criteria met. If so, PFC eligibility could be established due to the airport roads and curbside congestion relief provided by the bus service. If the airport operator wished to use PFC funds at the $4.50 level for this project, the more stringent “significant contribution” requirement would also need to be reviewed. If all of these crite- ria are met, the airport operator would have the abil- ity to consider using airport funds on the eligible public, non-revenue-producing areas of the offsite terminal. The airport operator would next explore potential federal funding sources. FTA Section 5307 grants would be explored for terminal development funding. FTA Section 5309 grants may be available to assist in the purchase of low-emission buses. If the airport is located in a federal air-quality non- attainment area, coordination with the MPO for potential CMAQ funds would also be explored. The airport operator’s focus on reducing single- occupancy-vehicle trips and the associated emissions reductions would make the parking facility at the offsite terminal eligible for CMAQ funds. After exploring the grants listed above, the airport operator would develop the financing plan most appropriate for their organization. This may include the use of airport revenue, bonds, and/or the other federal and state credit assistance programs listed previously. The case studies in this section have focused on pre- senting examples of the best uses of currently avail- able funding sources, but these case studies are of existing terminals that do not meet the report’s focus on offsite terminals outside of a 10-mile airport radius with a non-stop transportation connection to the airport (the case studies do, however, illustrate the different functions that any offsite terminal may provide). For that reason, this hypothetical case study shows potential funding sources for an existing off- site terminal as if it were being planned and devel- oped today. For this financing case study the key assumptions are • The airport operator is the project sponsor. • The terminal is located 15 miles from the airport. Transportation is provided via diesel-powered motor coaches that use dedicated HOV lanes on the Interstate between the offsite terminal and the airport. • The offsite terminal provides basic concession serv- ices and a waiting area, as well as 1,000 long-term parking spaces for passengers, 20 short-term park- ing spaces, and 800 parking spaces for airport employees. • Bus service is direct and non-stop between the off- site terminal and the airport terminal area, ensur- ing that only airport passengers and employees use the bus service. • The airport operator leases the offsite terminal from a local real estate company. • The airport operator has a contractual agreement with a private company to operate the bus service. The private company owns and maintains the buses. • Currently baggage check-in processes are not per- formed at the offsite terminal, although they may be in the future. If this terminal project were under development today, the first step for the airport operator would