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OCR for page 65
Finance Overview 65 Incentives can assist as well by lowering the operating cost of the project. For example, a third- party developer may construct buildings and improvements on a piece of airport real estate and sublet to a tenant. An incentive such as ground rent abatements or deferred airport fees may improve the cash position of the developer for a period of time while marketing occurs, or the developer may be able to pass those incentives along to the tenant as an incentive for the tenant to occupy the facilities. Beyond grants and incentives, the developer--whether the tenant, the air- port itself, or a third party--is left with cash and debt to satisfy the development costs and oper- ating expenses of the new facility. While cash is mostly straightforward, debt can vary and come in a variety of types but generally falls into one of two areas: public and private. The following sec- tions list available funding sources, both grant and debt, and provide an overview of each. 5.6.1 Airport Improvement Program The AIP provides grants to public agencies for the planning and development of public-use airports. AIP funds are typically not available for revenue generating projects, so it may be diffi- cult, though not impossible, for the airport sponsor to use these funds for projects designated for commercial activity (e.g., GA terminals, aircraft hangars, FBOs). AIP funds are apportioned in the following categories: Primary Entitlement, Cargo Entitlement, State Apportionment, Non-primary Entitlement, and Discretionary. The following provides a brief overview of each of the above and how the funds can be used. A more detailed overview of these programs can be found in the Airport Improvement Program (AIP) Handbook, Order 5100.38C, and ACRP Report 16: Guidebook for Managing Small Airports. Primary Entitlement Funds: These funds are given to commercial service airports with annual enplanements of 10,000 or more. Distribution is based on a formula that takes into consideration the total number of passengers an airport serves, with a $650,000 minimum annual entitlement. Cargo Entitlement Funds: Entitlement funds are given to cargo service airports that handle a landed weight of at least 100 million pounds per year. Landed weight is the total weight of the aircraft and cargo, and is inclusive of all-cargo aircraft only (not passenger aircraft that may also be carrying cargo). Non-primary Entitlement Funds: General aviation airports listed in the National Plan of Integrated Airport Systems (NPIAS) are eligible for $150,000 a year. They can accumulate this money over a 4-year time frame without penalty. If this money isn't used by the 5th year, that year's money is forfeited and cannot be obtained. State Apportionment: The FAA will allocate AIP funds to be used within designated states based upon the population and area of the state. The airport sponsor must apply directly to the FAA for these funds unless the airport is in a block grant state. If in a block grant state, the airport sponsor will apply to the state aviation authority for state apportionment funding. Discretionary: After all AIP obligations under the entitlement funding formula are met, remaining funds can be distributed to any NPIAS airport at the discretion of the FAA. The air- port sponsor must apply directly to the FAA to obtain discretionary funding. It is important to note that under Order 5100.38C (Airport Improvement Program Handbook), several arrangements allow use of entitlement funds at a different location than the entitled air- port so unused amounts are not carried over each year for airports with no planned project. In