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Chapter 7 reviews reasons ground transportation services need to be managed and strategies for managing them, including measures to enhance public transportation services. The chapter further examines the operational and institutional challenges for implementing these strategies and identifies potential funding sources. The Need to Manage Services The goals of most airport operators include providing the traveling public with safe, conven- ient, and efficient access to all airport facilities and encouraging the use of public transportation by airline passengers and employees in a manner that is consistent with other goals of the airport and the community it serves. To accomplish these goals, airport managers typically seek to man- age and control public transportation and commercial ground transportation services operating at the airport to the extent permitted by local, state, and federal laws. There are many reasons that such oversight is necessary: â¢ In most communities, no single state or local agency is responsible for enforcing the opera- tions of all these commercial ground transportation services. â¢ The state and local agencies responsible for enforcing ground transportation services typically have (1) responsibilities for multiple industries (e.g., public utilities, towing services, as well as bus and limousine services) and (2) insufficient staff resources to inspect vehicles and enforce the established rules. â¢ The providers of airport ground transportation services are typically a mixture of public agencies, and large and small private businesses having a wide range of capabilities, finan- cial resources, and interest in attracting business by providing high levels of customer service. â¢ Often the owners of the ground transportation services have little direct control over the behavior or actions of the drivers or operators who lease (or sublease) vehicles and who have direct contact with airline passengers. â¢ In the absence of regulations (because there are few institutional, legal, or financial barriers), airport ground transportation services can be readily initiated at U.S. airports by individuals who lack sufficient financial resources (to maintain their vehicles or market their services) or sufficient experience in operations, customer service, or other skills. If these operators are unable to attract sufficient customers legitimately, they may attempt to solicit business illegally, defer vehicle maintenance, or engage in other improper activities that result in divert- ing customers and revenues from other operators. â¢ New services can be difficult to introduce or promote if they do not easily come within the jurisdiction of existing regulating agencies or can be challenged by existing operators on the basis of need and necessity. 153 C H A P T E R 7 Managing the Airport Landside System
Airport Ground Transportation Management Strategies Most airport managers require all operators of commercial ground transportation services doing business at the airport to enter into a formal business relationship with the airport author- ity or operating agency. (In most communities, any vehicle is allowed to drop off passengers at the airport, but only authorized or permitted vehicles are allowed to pick up passengers.) Typically, commercial vehicle operators are required to obtain an airport permit in order to do business at the airport. By obtaining and signing the airport permit, the commercial vehicle operator indicates its willingness to abide by the rules and regulations established by airport management, and pay certain specified fees. Airport rules typically regulate (1) the use of airport roadways and other facilities; (2) the age, condition, and minimum insurance coverage for the vehicles used to transport passengers; and (3) the behavior and appearance of the drivers or representatives of the commercial vehicle operators. Airport Fees Airport fees are typically imposed to recover airport managementâs costs of administering the permits and providing and maintaining the airport facilities used by the commercial vehicle operators. Commercial vehicle fees can also be established to achieve other goals: â¢ Encourage the use of public transportation by reducing or not charging fees. For example, most airport managers do not charge any fees to scheduled public bus and rail services pick- ing up airline passengers and airport employees. â¢ Support public transportation by using fees to contribute to the cost of constructing facilities serving public transportation operators that are located on airport and used exclusively to transport airline passengers and airport employees. â¢ Achieve air quality goals by encouraging the use of vehicles using alternative fuels or hybrid vehicles, or by requiring the consolidated courtesy vehicle services. â¢ Promote efficient operations by restricting the number of trips made by individual operators or promoting consolidated operations by courtesy vehicles. â¢ Encourage the efficient use of airport facilities by limiting curbside dwell times or the number of circuits made around airport roadways. Measures to Encourage Use of Public Transportation Airport managers can encourage the use of public transportation by (1) providing a separate roadway for commercial ground transportation (e.g., commercial lanes or drives), (2) prioritiz- ing or reserving other portions of the terminal buildings, and/or (3) developing transit hubs on the airport. These measures are described in the following paragraphs. Commercial Lanes A number of airports reserve separate roadways or commercial lanes, along with the adjacent curbside areas, for commercial vehicles. Access to these commercial roadways may be gate con- trolled, so that only authorized vehicles can enter and pick up passengers. Drivers of authorized vehicles must have proximity cards or radio frequency identification system transponders (e.g., automated vehicle identification system tags) to activate the gates or signify that they are permitted to access the passenger pick-up areas. Prioritized Facilities Providing staffed counters in baggage claim areas and passenger waiting areas or shelters can enhance the level of service for public transportation customers. The operations of public 154 Ground Access to Major Airports by Public Transportation
transportation services can be improved by providing direct connections between airport roadways and HOV lanes or by reserving space to serve the needs of the transit providers. Transportation Counters in Baggage Claim Areas. Access to transportation or ticket coun- ters, typically found in the baggage claim area, can benefit potential customers and ground trans- portation providers. Counters can help passengers (1) identify available public transportation services; (2) readily determine the optimum route, schedule, and fares; and (3) purchase a ticket before boarding the vehicle. Operators have found that staffed counters in the terminal can assist in increasing their market recognition, round-trip ticket sales, and volume of walk-up business. Several airport operators limit the ground transportation providers that are allowed to staff counters in the baggage claim area, generally preferring those who have concession contracts or operate scheduled services. Passenger Waiting Areas. To improve customer service, several airport managers provide heated/air-conditioned waiting areas with seating and other customer amenities located adja- cent to the transportation counters or the curbside pick-up areas. Several airports provide ground transportation centers (GTCs) or intermodal centers, which provide waiting and seat- ing areas at a remote location. GTCs are described in more detail later in this chapter. HOV Lane Access. Public transportation operations, particularly travel speeds and travel time reliability, are enhanced by the availability of HOV or bus-only lanes linking the airport with the city center or other major destinations. In some communities, all commercial passen- ger vehicles are allowed to use the HOV lane, including deadheading taxis and limousines. In others, the roadways are reserved for bus use only. For example, scheduled airport buses serving Pittsburgh International Airport use the West Busway, a 5-mile-long exclusive roadway that links downtown Pittsburgh with the Borough of Carnegie. As of May 2001, about half of the 2,400 bus riders using the Busway were traveling to and from Pittsburgh International Airport. In Connecticut, HOV lanes on I-91 allow commercial ground transportation vehicles accessing Bradley International Airport (Windsor Locks, Connecticut) to bypass highway congestion. Transit Hubs and Layover Points At some airports, the airport curbside operates as a transit hub; public bus schedules are designed so that bus riders can transfer to other routes stopping at the airport. Such schedules improve public transit access to the airport, but the large number of non-airline passengers may add congestion at the terminal building curbside area. Often bus routes terminating at an airport are scheduled to provide layover time (or recovery time) so that drivers can take their scheduled break inside the terminal, while the unattended bus remains parked at the curbside. Airport man- agers can help enhance transit operations and service by working with public transit operators to allocate the required space at a mutually convenient location, while recognizing the trade-offs between encouraging the use of public transportation and promoting the efficient use of curb space. Currently, activities occurring within 300 feet of the air terminal are limited for security reasons; such a transit center would logically be located further from the terminal building. Customer Service Enhancements A ground transportation center or intermodal center is similar to a bus terminal or rail station located near an airport terminal facility. Customer services provided at a GTC may include cov- ered boarding areas for buses and vans; heated and air-conditioned waiting areas; restrooms; ground transportation ticket sales/information counters; kiosks or stands selling magazines, food, beverage, and other passenger amenities; and access to rental car areas. Prior to the homeland secu- rity changes implemented after September 11, 2001, some GTCs offered airline ticketing/baggage check-in areas and baggage claim facilities. In 2007, airport operators used third-party baggage- handling companies to provide remote baggage check-in services, as discussed in Chapter 5. Managing the Airport Landside System 155
By consolidating ground access services in a single location near the passenger terminal, a GTC can benefit the traveling public and encourage the use of public transportation in the following ways: â¢ A GTC allows commercial ground transportation passengers (and vehicles) to make fewer stops, especially at airports with multiple terminals or multiple passenger pick-up/drop-off areas, thereby reducing passenger travel times. â¢ A GTC reduces curbside requirements at the terminal buildings. â¢ A GTC reduces traffic volumes and vehicle miles of travel on terminal area roads. â¢ A GTC allows passengers to more easily recognize the entire array of transportation choices and thereby compare available service, fares, and travel times. â¢ A GTC facilitates the provision of staffed transportation and ticket sale counters and supports kiosks or small news/food/beverage concessions. â¢ A GTC provides a central location for commercial vehicle staging and holding. â¢ A GTC reduces the operating costs for the public transportation providers, especially at air- ports with multiple terminals or multiple commercial vehicle stops. â¢ A GTC can support or be combined with a consolidated rental car customer service center. Among the key factors required to encourage use of the public transportation services at a GTC are (1) short walking distances to/from the aircraft boarding gate areas (or the availability of a reliable and comfortable linkage, such as an automated people mover that provides single- vehicle service to/from the GTC) and (2) passenger service equivalent to that provided at the airline terminal. This level of passenger service implies that passengers have the ability to check and claim baggage at the GTC and do not need to carry their bags long distances or on and off a people mover or shuttle bus. At some airports, a GTC is simply a surface parking lot or portion of a parking structure reserved for certain commercial ground transportation services (e.g., scheduled vans/buses or courtesy vehicles). Miami International Airport is completing the early elements of the Miami Intermodal Center, an ambitious GTC that will allow airline passengers to transfer to/from regional rail systems, scheduled buses, rental cars, private vehicles, taxis, bicycles, and pedestrian ways. Ultimately, the Miami Intermodal Center will provide airline ticketing and baggage- handling facilities. In the long term, an automated people mover would link the Miami Inter- modal Center with airport passenger terminal buildings, with potential connections to the Miami cruise ship berths. The Miami Intermodal Center is being funded, in part, through loans advanced through the Transportation Infrastructure Finance Act. Long-range plans for the cen- ter include a mixed-use development including office, hotel, retail, and entertainment space. Automated Traffic Monitoring and Management Programs More than 25 U.S. airports use automated vehicle identification (AVI) systems to improve the management of commercial vehicle activity. AVI systems provide reliable data on the volume of vehicle trips by location, date, and operator. Common AVI system applications at airports include monitoring commercial vehicle activity, controlling access to restricted areas, dispatching/ controlling shuttle bus and taxi operations, and providing shuttle bus passengers with arrival time and stop location information. AVI systems can allow airport managers to promote the efficient use of airport facilities by establishing the following: â¢ Restrictions on number of tripsâThe AVI system can record the number of trips each ground transportation operator makes so that airport management can set limits on hourly, daily, and/or monthly trips. â¢ Measures to encourage consolidated operationsâManagement can promote consolidated courtesy vehicle operations by charging participating ground transportation operators 156 Ground Access to Major Airports by Public Transportation
discounted access fees (calculated on a per-trip basis). AVI systems can record the number of trips made by each operator and identify those that are not participating. â¢ Dwell time restrictionsâManagers can encourage efficient use of curbside areas by placing limits on dwell time (the length of time a commercial vehicle remains parked at the curbside or is on airport roadways). AVI systems can track when a vehicle enters and exits a curbside area (or airport property) and identify vehicles that exceed prescribed limits. â¢ Restrictions on the number of circuitsâAirports can set restrictions on the maximum num- ber of permitted circuits that a commercial vehicle can make around the airport roadway system within an established time period. These restrictions are intended to discourage drivers of empty (or partially empty) vehicles from circling continuously to advertise their service or solicit additional passengers. The AVI system automatically detects any van exceeding a cir- cuit limit and provides documentation supporting penalties and fines. â¢ Restricted access to commercial lanesâAs noted above, some airports issue AVI transpon- ders to control access to commercial lanes or passenger pick-up areas. For these airports, the AVI system also provides enforcement capability by allowing airport management to deacti- vate the transponders when providers violate airport rules. â¢ Schedule adherenceâThe AVI system can monitor the headways or trips per hour or day made by each scheduled ground transportation operator. These data can be used to confirm adherence to posted schedules or maintenance of established maximum passenger wait times. â¢ More efficient vehicle dispatchingâAt airports where AVI transponders have been installed on taxis and limousines, the AVI systems can be used to dispatch taxis and pre-arranged limousines from a holding area (or stack) to the appropriate curbside area and to ensure the correct sequencing of these vehicles. Business Arrangements at Airports to Improve Service to the Traveling Public Airport managers use various business arrangements with ground transportation operators to provide the traveling public with a high level of customer service and to encourage the use of public transportation. The most common forms of business arrangements are open access, exclusive or semi-exclusive concession agreements, and third-party management contracts. Increasingly, airport managers appear to be establishing exclusive or semi-exclusive agree- ments. With these arrangements, the airport operator has a better ability to ensure service qual- ity and performance, and the operator has a greater financial incentive to maintain the desired standards. Open Access With open access systems, any ground transportation operator, properly licensed by the local regulatory authority, can pick up passengers at an airport. The primary benefit of this system is that any business, large or small, can serve the airport. Such open access, in turn, provides cus- tomers with options and promotes competitive fares and services. Small ground transportation operators often favor open access and lobby local politicians to implement or maintain such arrangements. Open access systems function well in communities with multiple, well-operated transportation providers (e.g., multiple taxi companies), and with effective enforcement. Key concerns with an open access system include the following: â¢ Lack of control over service levelsâAirport management has little ability to control the level of service standards for vehicle appearance/maintenance or driver appearance/knowledge. Instead, other agencies are responsible for specifying and enforcing the minimum standards for vehicles and drivers. Managing the Airport Landside System 157
â¢ Inability to balance supply and demandâIn communities where the number of ground trans- portation providers exceeds passenger demand, operators will experience long waits and earn less revenue. Some drivers may be tempted to improperly solicit passengers or engage in other illegal activities. Conversely, in a community with few taxis or other ground transportation services, there may not be enough airport service during late night hours, periods of inclement weather, or when there are requests for service at other locations (e.g., downtown or a convention center). Exclusive and Semi-Exclusive Concessions Agreements Most airport managers have agreements with concessionaires to provide certain services on an exclusive or semi-exclusive basis. Concessionaires typically include hotels, food and beverage sellers, and rental car companies. Concession agreements specify the services that the companies are allowed to offer at the airport, the manner in which they are to be offered, the prices or mark- up permitted, and the airport fees and charges. The fees are normally calculated on the basis of some measure of activity (e.g., percentage of gross revenues or per deplaning passenger) and include a required minimum annual guaranteed payment. Concession agreements are usually awarded through a competitive bid or proposal process that allows airport management to con- sider the experience of the operator, service quality, and fees. Many airports also use exclusive or semi-exclusive concession agreements for ground access services, including taxi, shared-ride van, and scheduled bus or van service. As part of a conces- sion agreement, airport management typically specifies the minimum required service standards. These standards may include the following: â¢ Minimum hours of operationâFor example, a concessionaire may be required to ensure that vehicles are waiting at the airport from the time of first arriving flight until 1 hour after the last scheduled arriving flight. â¢ Adequate supply of vehiclesâA concessionaire may be required to ensure that sufficient vehicles will be available to serve the expected volume of deplaning passengers at all times, particularly at airports with a small public transportation market or that experience seasonal fluctuations in demand. â¢ Level of customer serviceâThe concession agreement may specify the maximum waiting times, the maximum number of en route stops, requirements for transporting disabled passengers, acceptance of credit cards, and requirements for schedule adherence. â¢ Fares or surchargesâAirport management may require the concessionaire to specify its fare structure, including applicable surcharges (e.g., for baggage). â¢ Geographic coverageâThe request for proposals or bids would typically specify the minimum geographic area(s) that the concessionaire would serve. â¢ Vehicle standardsâConcession agreements typically specify the required standards for vehi- cle safety (e.g., properly functioning brakes, lights, and emissions controls), cleanliness (e.g., prohibition of dents, rust, or torn or soiled seats), convenience and comfort (e.g., air conditioning), two-way radio, exterior signage or lettering, and maximum age of vehicle. The agreement may also specify vehicle size, passenger capacity (e.g., number of seats), and bag- gage room, if these standards are not already defined by local authorities. â¢ Driver standardsâAgreements typically establish or support airport standards for expected driver behavior (e.g., no solicitation), appearance and attire, personal hygiene, local knowl- edge, and/or customer service skills. Balancing Supply and Demand Concession agreements allow airport management to balance supply and demand by requiring the contractor to direct company-controlled drivers to serve (or not serve) the airport as warranted. 158 Ground Access to Major Airports by Public Transportation
The concessionaire is responsible for meeting these requirements while also ensuring that the driv- ers are assigned an appropriate number of trips and receive an opportunity to earn a fair salary. In absence of a concession agreement, airport managers have only a few other options to balance supply and demand: â¢ Limiting the number of vehicles serving the airport each dayâFor example, managers can implement odd-even license plate programs that allow only half of the authorized taxis to serve the airport on a given day. â¢ Closing the entrance to the hold lotâThis action effectively closes the airport to commercial vehicle operators and prevents additional vehicles (e.g., taxis) from entering the airport. â¢ Increasing the minimum standardsâBy establishing higher standards for ground transporta- tion providers (e.g., minimum fleet size or insurance requirements), vehicles (e.g., maximum age of vehicles), or driver qualifications, airport management can discourage less qualified com- panies from serving the airport. With a concession agreement, airport management typically grants the concessionaire certain privileges, including access to preferential curb space and to ticket/information counters in the terminal building, and the exclusive right to provide service to certain geographic areas (e.g., downtown). For sufficiently lucrative services, the airport may be able to require the con- cessionaire to support services that are less lucrative or not self-supporting. For example, airport management can require the concessionaire awarded a shared-ride van or taxi contract to also operate or provide a scheduled bus service to downtown or other destination. Such arrange- ments are particularly feasible in communities where a major corporation owns both a major taxi service and provides scheduled airport bus service or, alternatively, in communities that have established goals for disadvantaged business participation in airport services. Third-Party Management Contracts Airport management may also contract with a third party to manage and enforce ground trans- portation operations at the airport. For example, at San Francisco International Airport, a third- party contractor is responsible for dispatching taxis, and controlling and monitoring charter buses and limousine operations. At Portland (Oregon) International Airport, a third-party contractor is responsible for providing information, directing passengers to ground transportation services, dispatching taxis, and monitoring operations along the commercial roadways. While management of both airports retains the responsibility for establishing policies, fees, and regulations, the third- party contractor can significantly influence the level of service provided to the traveling public. Regulatory Considerations for the Introduction of New Services Airport managers must consider numerous regulatory, institutional, and market factors when introducing new airport ground transportation services. Some of the issues and challenges related to regulating and promoting public transportation services are described in the following sections. Challenges of Introducing New Services In most communities, it is necessary to obtain state authority to introduce a new door-to- door, shared-ride, or scheduled transportation service. Typically, the operator of the new ground transportation service must meet the following requirements: â¢ Describe where and how it will serve the public, including the proposed fares or tariffs â¢ Demonstrate sufficient demand for the service Managing the Airport Landside System 159
â¢ List all other routes that operate partially or wholly within the proposed service area â¢ Present a business plan indicating the expected revenues and costs of operation â¢ Provide a financial statement and evidence of insurance In some instances, the operator must demonstrate that the local public transit operator is unable to meet the transportation needs of the target market or to describe the impact on exist- ing public transit services. The operator is usually required to provide letters from the public (e.g., local communities or other sources) and evidence to demonstrate need and necessity for the proposed service. Existing operators are permitted to file objections to the statements of need to introduce new services and to challenge the new operatorâs ability to sustain a business with- out adversely affecting existing businesses. The operator can apply for an airport permit only after obtaining the required state or local operating permits. These procedures may present a significant hurdle for a small operator, particularly an oper- ator without a properly defined business plan or service plan, without prior experience in the industry, and without sufficient capital resources. Typically, airport management does not have programs to support or assist new businesses seeking to initiate transportation service. Competition and Enforcement Considerations when introducing new public transportation services include the perceived and actual competition between differing classes of ground transportation services, the need to be able to enforce regulations restricting and controlling ground transportation services, and the potential overlap between the services provided by each class of service. Balancing the differing (and competing) requirements of multiple services may be especially challenging when select- ing ground transportation services for a planned GTC. Some of those challenges involve the following services and concerns: â¢ Private vehiclesâThe primary purpose of a GTC is to serve commercial ground transporta- tion services. Therefore, airline passengers traveling in private vehicles would likely be directed to space at the terminal building curbsides, while the GTC would be reserved for commercial ground transportation services. â¢ Private vehicles versus privately owned limousinesâAirline passengers traveling in privately owned or corporate-provided limousines would normally expect to receive a level of service similar to that available to passengers traveling in private vehicles. Therefore, privately owned limousines would likely be directed to curb space at the terminal building. â¢ Privately owned versus pre-arranged limousinesâIf passengers perceive that being picked up and dropped off at the terminal provides a higher level of service and convenience than being picked up and dropped off at the GTC, they will request that privately owned limousine services stop at the terminal building rather than the GTC. As it would be difficult for police to readily distinguish between a privately owned limousine and a pre-arranged limousine or town car service, it would be difficult for police to prevent privately owned limousines or town car services from stopping at the terminal building curbsides. If police are unable to prevent, or enforce regulations prohibiting, use of the terminal curbside by pre-arranged limousines, these limousines would likely be permitted to use the curbsides. â¢ Pre-arranged limousines versus taxisâTaxi operators perceive limousines as competitors. If pre-arranged limousines are permitted to use the terminal building curbsides, taxi opera- tors would likely pressure airport management (or perhaps city or county government lead- ers) to allow taxis to use the curbsides. The taxi operators would claim that they would lose customers to their competitors (i.e., limousines) and/or that their customers would not use the GTC. At airports that have planned GTCs, management has agreed to allow taxis to drop off and pick up customers at the terminal building curbside. 160 Ground Access to Major Airports by Public Transportation
â¢ Taxis versus shared-ride vansâThe operators of shared-ride vans perceive that they are com- peting with taxis for on-demand customers. If taxi operators are permitted to drop off and pick up customers at the terminals, the operators of shared-ride van services would likely demand the right to provide equivalent services, especially if the operators perceive that cus- tomers value access to the terminal building over access to the GTC. Again, as with the taxi operators, the decision would likely involve others besides airport management. â¢ Shared-ride vans versus scheduled vans/busesâThe operators of scheduled vans and buses, particularly at downtown locations, perceive that they compete with the operators of shared- ride van services. The scheduled van operators will likely resist picking up passengers at a loca- tion that they perceive provides an advantage to their competitors. â¢ Courtesy vehiclesâLocal rental cars, hotel/motels, and other operators of courtesy vehicles would also likely demand that they be permitted to drop off and pick up customers at the terminal buildings rather than at a GTC. As a result of the enforcement challenges and competitive factors described above, some air- port managers have determined that the only users of the GTC would be public transit services and scheduled buses and vans. All other transportation services were directed to pick up and drop off passengers at the terminal building. While such allocation decisions may enable airports to offer a range of ground transportation services, this approach could discourage the use of pub- lic transportation by airline passengers or employees, particularly if baggage check-in or baggage claim services are not available at the GTC. Factors Governing Airport Financial Operations Airport authorities exist in a variety of forms, and their specific powers and responsibilities are established by their enabling legislation. Some airport authorities are independent public bodies created by state legislation; others are municipal corporations or agencies created by one or more local jurisdictions under general state statutes governing the establishment of inde- pendent authorities. Many airport authorities sponsored by state or local legislation operate relatively independently of their governmental sponsors, while remaining responsive to politi- cal concerns and priorities. In other cases, the sponsoring jurisdiction retains some oversight of airport operation, such as approval of operating budgets and bond issues. This section provides an overview of the key legal, financial, institutional, and jurisdictional factors affecting public transportation to airports. As illustrated in Figure 7-1, typical factors include (1) federal regulations and policies and grant assurances made by airport sponsors, (2) the airport operatorâs authorizing legislation, (3) the bond indenture for the airport, and (4) the airportâs airline use-and-lease agreements. The airportâs concession agreement(s) also affect the airport operatorâs net revenue and financial capacity. Authorizing Legislation Airport operators that are independent entities or enterprise funds of a city, county, or state government typically are governed by authorizing legislation or a local charter that establishes the airport operatorâs organizational structure, responsibilities, and powers. The authorizing legislation may specify facilities, such as airport access roads, that the airport operator is respon- sible for developing, maintaining, or both. Bond Indenture The bond indentureâalso called a bond resolution or bond ordinanceâprovides the legal basis for issuing airport revenue bonds and defines the terms under which additional bonds Managing the Airport Landside System 161
might be issued, including the need for revenue-generating projects. The bond indenture defines what may or may not be included in the definition and computation of airport revenues and expenses. The indenture establishes various funds and accounts for the payment of interest and principal on the bonds from airport revenues; establishes the priority of pay- ments for all of the airport operatorâs obligations; and sets forth covenants between the issu- ing entity and the bondholders, including a rate covenant requiring the airport operator to set rates and charges to produce specified levels of revenues. Some airport bond indentures may also include principles to guide the establishment of rates and charges for the use of air- port facilities. Airline Agreement An airportâairline agreement generally stipulates the rights, privileges, and obligations of the airport operator and the airlines serving the airport and sets forth the manner in which the rentals, fees, and charges paid by the airlines for use of the airport are calculated and adjusted. The airline parties in such use-and-lease agreements are called âsignatory airlines.â Many airline agreements contain provisions that require a certain number or percentage of the signatory airlines to approve or disapprove certain decisions of the airport operator, particularly capital expenditures. These provisions are known as âmajority-in-interestâ (MII) provisions and are designed to give the signatory airlines some control over the long-term financial obligations undertaken by the airport operator for which the airlines are commit- ted to pay. Some airports, however, are not governed by such agreements; instead, rates are established by ordinance or regulation. In those instances, the airport operator typically adopts a policy for calculating user rentals, fees, and charges and applies those procedures consistently from year to 162 Ground Access to Major Airports by Public Transportation SOURCE: Jacobs Consultancy. NOTES: FAA/DOTâFederal Aviation Administration/Department of Transportation NTSBâNational Transportation Safety Board EPAâEnvironmental Protection Agency OSHAâOccupational Safety and Health Administration Figure 7-1. Factors governing airport financial operations.
year. The FAAâs Policy Regarding Airport Rates and Charges broadly governs airport rate-setting in the absence of an airline agreement and dispute resolution. Concession Agreements Many airport operators enter into agreements with service providers, including parking garage operators, rental car agencies, and vendors of food, news items, and gifts. These agreements are often the largest source of non-airline revenues at most airports and do not govern how those revenues can be used. Sources of Funding FAA grant assurances require airports in the United States to be as financially sustaining as pos- sible. Accordingly, rentals, fees, and charges should cover all operating and capital costs, including retirement of debt. The capital requirements of airports are significant today and are expected to increase in the future. The main sources of funds to build airport projects include the following: â¢ Internally generated capital resulting from retained airport revenuesâAirport operators charge and collect rentals, fees, and charges for the lease and use of facilities to passenger and cargo airlines, concessionaires, and others providing airport support services. â¢ Bond proceedsâFour basic types of bonds are issued to fund airport capital improvements: (1) general airport revenue bonds (GARBs) secured by the revenues of the airport and other revenues as may be defined in the bond indenture; (2) bonds backed either solely by passen- ger facility charges (PFC) revenues or by PFC revenues and airport revenues generated by rentals, fees, and charges; (3) special facility bonds backed solely by revenues from a facility constructed with proceeds of those bonds; and (4) general obligation bonds supported by the overall tax base of the issuing entity (the airport sponsor). â¢ PFC revenuesâSubject to authorization by FAA, commercial service airports are allowed to impose a $1, $2, $3, $4, or $4.50 PFC per enplaning passenger. The $4 and $4.50 PFC amounts are pursuant to the Aviation Investment and Reform Act for the 21st Century (AIR-21) FAA reauthorization. PFC revenues may be used as they are received (on a pay-as-you-go basis) to directly pay for approved capital projects or they may be used to pay debt service on bonds backed by PFC revenues. â¢ Federal grantsâFederal Airport Improvement Program (AIP) grants are funded by aviation- user taxes. AIP grants are made available to airport operators in two forms: (1) entitlement funds, which are apportioned to airports based on levels of passenger traffic and landed weight (for cargo entitlement funds), and (2) discretionary funds, which are distributed based on the ranking of the airportâs projects in relation to other projects deemed most important for improving the national air transportation system. Federal funding is also occasionally pro- vided for airport surface transportation projects by FHWA and FTA. â¢ State and local grantsâState funding for airport and aviation-related projects typically comes from a variety of sources. Some of these, such as outright grants and matching share for fed- eral AIP grants, represent direct funding for airports. Others, such as registration, licensing fees, and dedicated or special taxes (e.g., fuel taxes), are collected as funding for more general state expenditures. Support from local government generally takes the form of bonds backed by general taxes, but can also include operating funds from local taxes. The distribution of funding sources for large- and medium-hub airports nationwide is sum- marized in Table 7-1. As shown in the table, airport revenue bond proceeds constitute the most significant source of funding, accounting for 58% of total funding for airport capital projects. AIP grants accounted for 21%; PFCs accounted for 11%; and retained earnings and local rev- enue accounted for 10% of the total. Managing the Airport Landside System 163
Federal Funding and Financial Oversight of Airports and Airport Access Projects In developing any strategy for funding off-airport access projects, it is important to recognize the challenges uniquely associated with each funding source and to identify the external approvals required for each, if any. This summary examines federal funding and financial over- sight of airports and focuses specifically on AIP grants, PFCs, and use of airport revenue. AIP Grants The federal AIP provides grants to support eligible capital projects. AIP funds come from the Aviation Trust Fund that is funded by taxes or user fees, including the airline ticket tax, a tax on air-freight waybills, an international departure fee, and a tax on general aviation gasoline and jet fuel. Eligible Access Roads. AIP grants can be used for airport access roads that meet the follow- ing conditions as provided in FAA Order 5100.38C, AIP handbook, Paragraph 620.a: â¢ The access road may extend only to the nearest public highway of sufficient capacity to accom- modate airport traffic. â¢ The access road must be located on the airport or within a right-of-way acquired by the air- port sponsor. â¢ The access road must exclusively serve airport traffic. Any section of the roadway that does not exclusively serve airport traffic is ineligible. More than one access road is eligible if the airport surface traffic is of sufficient volume to require more than one road. Related facilities such as acceleration and deceleration lanes, exit and entrance ramps, street lighting, and bus stops are also eligible when they are a necessary part of an eligible road. Certain access roads and related facilities are not eligible for AIP funding, including the following: â¢ Roads necessary to maintain FAA facilities installed under the Facilities and Equipment Pro- gram (which is budgeted separately from AIP) â¢ Roads exclusively serving industrial or non-aviationârelated areas or facilities â¢ Roads exclusively used for connecting parking facilities to an access road Eligible Rapid Transit Facilities. Facilities within the airport boundary that are necessary to provide a connection to a rapid transit system may be eligible if they primarily serve the air- port. FAA reviews such projects on a case-by-case basis. When an on-airport facility would have 164 Ground Access to Major Airports by Public Transportation Capital Funding Source Funding ($ billions) Funding (% of total) Bond Proceeds (ânew moneyâ bonds backed by airport revenues, including about 30% of PFC collections) $ 6.9 58% AIP Grants $ 2.4 21% PFC Collections (approximate 70% share used for pay-as-you-go funding) $ 1.3 11% Pay-as-you-go Funding (from retained earnings, state & local grants, other) $ 1.2 10% Average Annual Funding $11.8 100% SOURCE: Jacobs Consultancy, FAA, U.S. Treasury, Thomson Financial Securities Data, ACI-NA. Table 7-1. Estimated U.S. airport capital sources (5-year annual average, 2000â2004).
both airport and general use, FAA has limited AIP and PFC funding to components of the proj- ect that are reserved for exclusive airport use. Passenger Facility Charges In 1990, the U.S. Congress authorized PFCs to provide airports with an additional source of funding for capital projects. Under U.S. DOT regulations, a public agency that controls a com- mercial airport may be authorized to impose a PFC of $1, $2, or $3 per enplaned passenger. Projects eligible for PFC funding include 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. In 1991, federal guidance made ground transportation projects eligible for PFC funding if the pub- lic agency owns or acquires the right-of-way and any necessary land, although the FAA did not set any eligibility restrictions on the mode of transportation for airport access projects nor did it impose any requirements on the geographic proximity of the project to the airport. Typically, these projects are limited to areas on the airport or adjacent to the airport in light of the right- of-way requirement. Such projects are subject to FAA review on a case-by-case basis. AIR-21 authorized airports to collect PFCs of $4 and $4.50, but included additional eligibility requirements on the amounts that exceed $3. Large- and medium-hub airport operators must demonstrate that (1) a project will make significant contribution to improving safety and security, to increasing competition, to reducing current or anticipated congestion, or to reducing the impact of noise and (2) the project cannot otherwise be paid for from AIP. For surface or terminal projects, airport operators must be able to demonstrate that they have already made adequate provision for financing airside needs. In addition, large- or medium-hub airport operators charging a $4 or $4.50 PFC must forgo 75% of their AIP entitlements. Use of Airport Revenues Four federal statutes govern the use of airport revenue: â¢ Airport and Airway Improvement Act of 1982 (AAIA), as amendedâAAIA directed airport operators to âuse all revenues generated by the airport for the capital or operating costs of the airport, the local airport system, or other local facilities which are owned or operated by the owner or operator of the airport and directly related to the actual transportation of passen- gers or property.â â¢ Airport and Airway Safety and Capacity Expansion Act of 1987âAmong other provisions, this act narrowed the permitted uses of airport revenues to non-airport facilities that are âsub- stantiallyâ as well as directly related to actual air transportation. â¢ FAA Authorization Act of 1994âThis act strengthened enforcement of revenue-use require- ments and required annual reporting of airport finances and amounts paid to other units of government. Section 110 added a policy statement concerning the pre-existing requirement that airports be as self-sustaining as possible. â¢ FAA Authorization Act of 1996âThis act codified the pre-existing grant assuranceâbased revenue-use requirement and expanded the application of the revenue-use restriction to any airport that has received federal assistance. In 1999, the FAA Policy and Procedures Concerning the Use of Airport Revenue clarified a number of procedural and substantive rules that had been in effect since 1982. Key provisions are explained in the following paragraphs. Ground Access Capital Costs. Airport revenue may be used for the capital costs of an airport ground access project or for the part of a local facility that is owned or operated by the airport owner or operator and is designed exclusively for the use of air transportation of Managing the Airport Landside System 165
passengers or property, including use by airport visitors and employees (âincidental useâ by non- airport users is permitted). Ground Access Operating Costs. Airport revenue may also be used to pay the operating costs of an airport ground access project that can be considered an airport capital project or, as is the case for capital costs, the operating costs of the part of a local facility that is owned or operated by the airport owner or operator and is directly and substantially related to the air transportation of passengers or property. Allowing airport revenues to be used to pay the operating costs of a ground access project represents a change in FAA policy. (Generally, if a facility is not on land owned or controlled by the airport, airport revenues cannot be used to pay for it.) Use of Property for Publicly Owned Transit Projects. Airport property can be made avail- able at less than fair market value for public transit terminals, rights-of-way, and related facili- ties without being considered a violation of federal statutes governing airport finances if (1) the transit system is publicly owned and operated (or operated by contract on behalf of the public owner) and (2) the facilities are directly and substantially related to the air transportation of passengers or property. A lease of nominal value would be consistent with the requirement for airports to be self-sustaining. Use of Property for Private Transit Projects. The final policy states that, generally, private ground transportation services are comparable to private taxi and limousine services and are charged fees for the non-aeronautical use of the airport. These private entities are commercial enterprises that operate for profit, that are not supported by general taxpayer funds, and that are a significant source of revenue for the airport. However, in cases in which publicly owned tran- sit services are limited and in which a private transit service (bus, rail, or ferry) provides the primary source of public transportation, the airport operator may make airport property avail- able at less than fair market value. Federal Credit Assistance The Transportation Infrastructure Finance and Innovation Act (TIFIA) established a direct federal credit program. TIFIA authorizes the U.S. DOT to provide direct loans, standby lines of credit, and loan guarantees to public and private sponsors of large surface transportation proj- ects that meet certain eligibility criteria. Project sponsors of highway, mass transit, passenger rail, and intermodal facilities must submit an application to U.S. DOT for approval of funding assis- tance. TIFIA funding is limited and projects are selected on a competitive basis. To be eligible to receive TIFIA credit assistance, a project must be âof national significanceâ and must meet the following five criteria: â¢ Before an agreement is made for federal credit assistance, the project must be in an approved state transportation improvement plan (STIP). â¢ The entity undertaking the project must submit a project application to the U.S. Secretary of Transportation. â¢ 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 states for the most recently completed fiscal year. â¢ Project financing must be repayable in part or in whole from tolls, user fees, or other dedi- cated revenue sources. â¢ If the project is not undertaken by a state or local government or an agency or instrumentality of a state or local government, the project must be included in both the state transportation plan and an approved STIP. 166 Ground Access to Major Airports by Public Transportation
Grant Anticipation Revenue Vehicles (GARVEEs) and Transit GARVEEs Other federal legislation also permits federal aid funds to be used for debt-service and debt- issuance costs, which permits states to raise funds for current projects by issuing bonds backed by future federal aid highway funds. Environmental Implications of Federal Funding for Airport Access Projects Funding for airport access projects is subject to the provisions of both the National Environ- mental Policy Act (NEPA), the Clean Air Act Amendments of 1990 (CAAA), and about 20 other federal environmental laws, regulations, and executive orders. NEPA is the basic national char- ter for the protection of the environment and establishes policies and sets goals. Regulations at 40 CFR Part 1500 et seq. provide means to carry out NEPA. For certain types of federally funded or federally approved transportation projects, NEPA will require the preparation of an Environ- mental Impact Statement. Moreover, certain types of transportation projects will require the determination of air quality conformity pursuant to CAAA (ensuring that the proposed project will not worsen or impede efforts to reduce violations of the National Ambient Air Quality Stan- dards in non-attainment or maintenance areas). Managing the Airport Landside System 167