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OCR for page 35
The Nuts and Bolts: Development and Implementation 35 Memo to Agency setting ACP Policy. Executed Partnership Agreements. Results: The following are the results an agency can expect in terms of targets achieved, benefits realized and value added when an agency follows the recommended step outlined above: 1. All parties involved in development of ACP reach consensus on the policy and commit to collaboration. 2. Expectations are set and ownership and accountability established among the Leadership Team and throughout the agency. Step 2: Financial Planning and Management Goal: The goal of Step 2 is to develop a sound financial plan that standardizes financial calcu- lations for the agency, sets reasonable targets for financial metrics, maximizes revenue and the economic potential of the airport, and enhances opportunities for lower-cost financing and access to state and federal aid programs. Actions: The following is a list of actions, activities or tasks that should be completed during this step. Financial Targets: Evaluate and define targets for financial metrics and airport rates and charges such as cost per enplaned passenger, debt coverage, days of operating cash available, and operating ratio (operating expenses/operating revenues). These should be discussed and debated prior to evaluating a proposed ACP. Financial Model: Develop an airport financial model to assess methods for recovering oper- ating expenses and capital expenditures using the approach outlined in the airline agreement or as imposed by the airport by ordinance or regulation. Budget Allocations: Define budget allocations so that project costs are appropriated to the proper budget allocation in individual project cost estimates developed in the next step. Standards for Financial Calculations: Develop standards for calculating the annual revenues and operating expenses to be used in analyzing the operating impact of a project. Revenue Projections: Generate a list of all potential revenue streams and limitations on their use. Operating Expenses: Generate a list of all operating expenses, including risks associated with line items that are uncertain or could change significantly. Potential Funding Sources: Generate a list of all potential funding sources including, but not limited to, cash reserves, Alternate Minimum Tax (AMT) and non-AMT airport bonds, passenger facility charges (PFCs: a local fee charged to each boarding passenger), customer facility charges (CFCs), local and state grants, FAA AIP grants (entitlement, discretionary and letter of intent programs), TSA grants, airport operating revenue and other potential funding sources. Financial Allocation Standards: Develop standards for the allocation of scarce financial resources across cost centers and goals, as well as trade-offs between capital and operating costs. Capital Plan Revisions: Develop a process for how and when the capital plan will be revisited if or when something major happens like the loss of a carrier, a major decline in air service or passengers, infusion of new funding, an airline bankruptcy, the advent of a recession, or when conditions change such that projects are delayed, deferred, or cancelled. When: Financial Planning should happen at the beginning of the ACP process, before the Capital Planning step when the technical and financial estimating and analyses will be conducted.

OCR for page 35
36 Collaborative Airport Capital Planning Handbook Leader: Finance Department Knowledge: The Financial Department Leader must understand the following: Financial planning and management. Airport finance, funding sources, finance codes and budget allocations. Airport rates and charges and cost recovery methods. Public finance. Bond issuance. Capital and operating budget development and management techniques. FAA rules and regulations on AIP grants Grant reimbursement policies and procedures. Grant assurances. Skills: The Financial Department Leader must be skilled at the following: Developing and running financial models and developing operating and capital budgets. Calculating and assessing airport rates and charges. Overseeing staff conducting financial planning activities. Collaborating to engage partners. Setting the example for others to follow. Team building and being able to work productively with others. Potential Departments: The Financial Department Leader could be found in a department where 1) financial strategies are developed, 2) budgets are developed and monitored, and 3) funding sources are identified and secured. The Financial Department Leader might be in a finance department, an administrative and finance department, executive administration department or a properties and/or concessions department. Partner: CMT Methods: The following is a list of techniques that should be used to communicate and col- laborate with Partners during this step: Collaborate with the CMT in meetings and/or via collaboration technology to Generate targets for financial metrics. Generate standards for budget allocations to be used to develop all projects. Generate standards for allocation of resources. Develop a process for reevaluating the plan in the event of major financial crisis or hardship. Communicate with the Lead Technical Department in meetings and/or via collaboration technology: Standards for revenue forecast and operating impact analysis to be used to develop all projects. Communicate with the Leadership Team in meetings and/or via collaboration technology: The financial plan Products: The following is a list of written documents, processes, data, events, and/or other benefits that will be produced during this step: A financial plan, including target for financial metrics, potential funding sources, standards for allocation of resources and process for reevaluating the plan in the event of major finan- cial crisis or hardship. Financial model for use in Step 4 (Programming). Budget allocation definitions. Standards for calculating revenue and expenses of projects. Revenue projections. Operating expense forecast. Process for capital plan revisions.