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$ 14. Funding Capital Improvements general Key Po i nt Proposed funding for the implementation of an airport's capital improvement program is outlined in the airport's ACIP. Airport development funding is principally provided through: FAA AIP grants; State grants; Passenger Facility Charge (PFC) revenues (commercial airports only); Third party private financing; The Airport Issuance of bonds or other forms of debt; and Local and/or airport reserve funds. Each of these programs has its own requirements. The primary prerequisites for federal grants are that the work is legally eligible for federal funding, justified based on actual need, consistent with an approved ALP, and complete funding is expected to be available. Execution of capital plans are multi-year endeavors requiring extensive planning, coordination,and review by federal, state, and local agencies. The scope and magnitude of airport capital programs vary significantly based upon the identified needs of the specific airport. Sample ACIP Sketch F INAN C IAL rules 32

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D is c u s s i o n GENERAL Airpor t Capital Improvement Plan Airport sponsors prepare an ACIP that outlines the cost, type of funding, and timing for each capital item. The FAA and state funding agencies require submission of an annual ACIP, typically covering five years of projects. The ACIP is the primary tool for systematically identifying, prioritizing, and assigning funds to critical airport development. The FAA relies on the ACIP to serve as the basis for the distribution of limited grant funds under the AIP. AIP The FAA provides grants to airports through the AIP. Important elements of the AIP include: 1. Source of Funds: Funding is derived from user fees (e.g. passenger ticket taxes and fuel taxes) that are established by Congress and flow to the Federal Aviation Trust Fund. In addition to establishing the type and level of aviation user fees, Congress also enacts legislation that establishes annual authorization and appropriation levels for distribution of THE AIRPORT AIP funds. The FAA utilizes these legislative directives to make grant awards to airport sponsors. 2. NPIAS Inclusion: In order to receive an AIP grant, an airport must be included in the NPIAS. 3. AIP Eligibility: The project must be eligible under the law. AIP grants are used for the planning and development of airports including infrastructure, land acquisition, and noise compatibility programs. AIP funds cannot be used for airport operating expenses. The following table provides examples of the types of AIP eligible and ineligible projects: Eligible Projects Ineligible Projects Runway construction/rehabilitation Maintenance equipment and vehicles Taxiway construction/rehabilitation Offices and office equipment Apron construction/rehabilitation Fuel farms (with some exceptions) Airport marking, lighting, and signage Decorative landscaping Airport regulatory safety/security projects Artwork Airfield drainage Aircraft hangars (with some exceptions) FINANCIAL Land acquisition Industrial park development Automated aviation weather observation and reporting Marketing plans systems Some navigational aids Training Aviation planning studies Maintenance or repairs of buildings Environmental impact studies Movable furniture Runway safety area improvements Employee salaries Airport layout plans Employee parking lots Access roads located on airport property Roads not exclusively for airport purposes Removal of airport hazards Non-public aircraft aprons RULES 33

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4. Airport Layout Plan Consistency: AIP grant work items are required to be consistent with an FAA approved ALP, have undergone a thorough environmental impact review, and must conform to federal standards for the design and general construction of airport improvement and/or acquisition of land or equipment (see Issue Paper #10 The Airport: Planning and Developing Your Airport). The Airport 5. Demonstration of Need: Projects must be justified based on actual need. For example, a project to lengthen a runway should be based on a demonstrated need of at least 500 annual combined takeoffs and landings by the critical aircraft that needs the longer runway. The purpose of AIP is not to support a goal of "build it and they will come," but rather to meet current demand. 6. Type of Funds: Both commercial and general aviation airports receive entitlement grant funds and can also compete F INAN C IAL for discretionary funds. FAA entitlement grants for commercial airports are based on the number of enplaned passengers as well as the volume of cargo generated at the airport. Funding for general aviation airports is based on the amount of development that an airport has identified within the NPIAS. In the year 2010, the maximum entitlement amount a general aviation airport could obtain was $150,000 per year. General aviation airports can also compete for AIP grants through state apportionment allocations. Each state receives an apportionment for general aviation airports based on the size and population of the state. Discretionary funds are generally awarded based on project priorities, with required safety and security needs receiving the highest ranking and consideration. 7. Grant Assurances: Upon acceptance of an AIP grant, an airport sponsor pledges to adhere to a number of assurances as a condition for receiving federal funds. These assurances represent a binding legal agreement between the federal government and the airport sponsor (see Issue Paper # 19 Rules: Complying with Federal Grant Assurances). The AIP is administered by FAA's Office of Airports through a regional Airports Division or Airports District Office. In fiscal year 2010, 10 states, under a special Congressionally approved provision, administered the AIP program in lieu of the FAA. These "block grant" states include Georgia, Illinois, Michigan, Missouri, New Hampshire, North Carolina, Pennsylvania, Tennessee, Texas, and Wisconsin. rules 34

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State Grants GENERAL Most states offer an airport grant-in-aid program to provide matching funds for AIP allocations. In addition, some have robust grant programs that provide funding assistance for such items as airfield/building maintenance projects and other initiatives typically not eligible for federal aid. Passenger Facility Charge (PFC) Program Commercial airports are permitted to assess a fee on passengers known as a passenger facility charge (PFC). The airport sponsor must apply to the FAA for the authorization to impose and use PFC revenues and they generally range from $3 to $4.50 per flight segment with a maximum PFC of $18.00 per roundtrip ticket. Airlines collect PFCs through the ticketing process and transmit collected funds to airport sponsors to finance construction of airport improvements. Third Par ty Private Financing Provided an airport's enabling legislation authorizes such activity, third-party financing of airport improvements is also available to provide needed infrastructure to support aviation activity. This form of financing typically involves the lease of airport land to a private entity for construction and operation of aircraft hangars, automobile parking areas, or cargo THE AIRPORT handling facilities. Private developers construct the facilities at little or no cost to the airport in accordance with standards developed by the airport. At the end of the land lease, the facility reverts to the ownership of the airport sponsor. Issuance of Bonds or O ther Forms of Debt The issuance of bonds is the single largest source of funding for airport improvements; however, generally only large and medium hub commercial service airports can undertake this form of financing. These larger facilities generate sufficient revenues to fund operations and retire the debt service resulting from the issuance of the bonds, unlike small, non-hub and general aviation airports. For smaller airports, it is possible to obtain debt financing for projects by "piggy-backing" local general obligation bond issues if the local governing body will allow the airport to participate. Finally, commercial loans and/or "pooled" projects sponsored through state-backed programs also may be available. Local Funds and Airpor t Revenue In some instances, the local governing body allocates resources from its general funds to support airport improvement FINANCIAL projects. However, the availability of these funds can be limited given the scarcity of local funds, competition from other needs in the community, and opposition from citizen interest groups. Commercial airports generate revenue for capital projects from landing fees, airport leases, concessions, and automobile parking fees. Primary sources of revenue for general aviation airports are fuel flowage fees, hangar land leases, FBO leases, agricultural leases, and other non-aeronautical leases; however, revenues derived from these activities normally do not exceed the cost of operating the airport and are therefore not available for capital improvement projects. App l i c at i o n Recognize that the total demand for AIP resources far exceeds available funds. Work with FAA to seek funding for projects but be realistic and acknowledge the eligibility and justification requirements of AIP. Develop a well-thought and reasonable ACIP for development of your airport. RULES Become familiar with your state airport capital improvement funding program and learn how it complements AIP and how it can assist when AIP funds are not available. 35