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CHAPTER 5 Finance Overview Funding for and financing of an airport development project can vary widely, depending on the stakeholders that are involved, the incentives that are offered, the grant funding that's avail- able, and the methods that are applied. In short, the variety of funding combinations is limited only by the imagination. There are multiple factors that must be considered by the airport spon- sor. These considerations are dependent upon who will be developing the project in question: the airport sponsor, the tenant that will occupy the development, or a third-party developer. The following sections will address certain financial perspectives and tools that the airport sponsor may utilize when considering an airport development project. Understanding the inter- relationships between financing, valuation, and lease elements, and how these relationships affect each party entering into the lease agreement, is essential in maximizing the financial benefits and long-term health of the airport. 5.1 Airport Sponsor Perspective The airport sponsor has the prerogative of determining who will play the role of developer and how the airport development will occur. The airport sponsor can choose to seek tenants that will develop their own capital improvements, enlist the help of a third-party developer, or the air- port sponsor can decide to play the role of developer itself. With risk usually comes reward, so the airport sponsor may find interest in the reward side of the development business. And reward can come in the form of new revenues, additional aviation activity, jobs, the synergy needed to develop a business cluster, the attraction of based aircraft, or some combination thereof. 5.1.1 Funding Should the airport choose to play the role of developer, the airport sponsor becomes respon- sible for securing necessary funding, which may come in the form of grants, debt, or, most com- monly, a combination of funding sources. Grant funds are present in many airport development projects and represent the most desir- able financing option for an airport sponsor. However, grants are limited to certain items based upon the issuing agency and eligibility criteria. The FAA may allow, for example, AIP funds to be used to extend a taxiway that serves multiple sites and the aviation public, but not allow funds to be used for an aircraft parking ramp that serves a single tenant or that would be considered exclusive use (see Section 3.2.6: Exclusive Rights for greater detail on exclusive rights versus pref- erential treatment). Similarly, EDA grant funds may be eligible for facilities directly related to job creation but ineligible for a taxiway extension that might be seen as lacking connection to the stimulus of economic activity. 55