Guidebook for Evaluating Terminal Renewal Versus Replacement Options (2012)

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C-1 The purpose of this appendix is to provide an explanation of some of the tables and charts included as part of the Airport Cooperative Research Program (ACRP) 07-07 Guidebook for Evaluating Terminal Renewal versus Replacement Options. Some of the analyses presented in the Guidebook require professional training and experience. Those analyses are not described in this appendix. It is recommended that the users of the Guidebook consult the appropriate manuals and reports, as required. The two options addressed by this template are Terminal Renew (Option 1) and Terminal Replace (Option 2). It is envisioned that the general framework outlined in this template can be applied to alternative analysis scenarios. The individual work- sheets within the Microsoft Excel-based analysis template are described below. Template Table(s) within the Template Facility Requirements Table C-1 Facility Gap Analysis and Requirements Table Table C-2 Program Cost Estimate Table C-3 Performance Evaluation Table C-4 Project Funding Availability Analysis—Input Table C-5 Project Funding Availability Analysis—Output Table C-6 C.1 Facility Requirements (Table C-1) and Gap Analysis Template (Table C-2) The Facility Requirements and Gap Analysis Template is a tool to guide the determination of facility requirements and levels of service during the early stages of the project, typically through evaluation of planning options. Results for the industry methods and procedures used to determine the requirements for each terminal function are to be recorded in appropriate sections of the template. Sections or individ- ual elements of the airport’s terminal not represented in the table should be added, as required. Terminal facility requirements (Table C-1) can be calculated in a number of ways. Procedures and guidelines are available in: • ACRP Report 25: Airport Passenger Terminal Planning and Design • International Air Transport Association (IATA) Airport Development Reference Manual (9th Edition, April 2004) • International Civil Aviation Organization (ICAO) Airport Planning Manual, Part 1 The methods and procedures in these manuals require the development of daily and peak hour passenger activity data and aircraft arrivals and departures counts for existing and any future years relevant to the evaluation of options. A p p e n d i x C Analysis Templates

C-2 Guidebook for evaluating Terminal Renewal Versus Replacement Options Additional methods include ‘rules of thumb’ measures developed on the basis of typical rela- tionships between passenger and aircraft activity. Passenger and aircraft activity can be consid- ered on an annual basis (often expressed as million annual passenger, or MAP), daily basis (peak month average day, or PMAD) or on a peak hour basis (peak month average day peak hour, or PMADPH). For example, for some terminals, total enclosed square footage might range from 15,000 square feet to 25,000 square feet per aircraft gate; an airport terminal might justify one aircraft gate per 4 or 5 daily aircraft departures. Each airport and terminal is unique, so these measures are typically rough and best used to confirm the results of the more rigorous methods referenced above. At the beginning of the planning process and during the development of options, the planning team should determine the space to be devoted to the various terminal functions and develop performance metrics for the existing terminal: number of daily or annual passengers per ticket counter, concession area, baggage makeup and claim areas, etc. These results should be com- pared to the perceived level of service provided by the various functional areas of the terminal, such as the length of queues at ticketing or security processing, or concession sales per passenger. Gap analyses and requirements table (Table C-2) encompass all demand capacity calculations, facility requirements calculations, and performance and functionality shortfall analyses used to determine the short, medium, or long term need for facility alteration, improvement, or investment. Gap analyses include traditional planning activities for existing and future activity levels, such as: • Demand / capacity calculations for terminal functional and spatial elements • Facility requirements calculations based on standard industry measures or local needs • Functionality assessments for passenger and baggage processing and service levels Meanwhile, terminal design elements include the following: • Building condition surveys for elements such as roofs, curtainwalls, windows, floors, etc. • Life cycle status of major terminal systems and equipment • Concession requirements, as measured by revenue per passenger goals • Modernity issues related to community goals • Building code compliance (grandfathered and current) • Operation and maintenance (O&M) costs with respect to state of the art systems • ‘Green’ initiatives with respect to building systems and utilities use Many of these areas are (or should be) regularly investigated as part of: • Preparation of airport Master Plans • Annual O&M cost calculations • Real time building systems monitoring and control systems • Non-routine building events • Benefit-cost analyses for capital plan development. Separately, or in combination, these gap analyses are part of determining the need for major terminal changes and investment, including the decision to renew or replace facilities. Template Steps and Notes (Table C-2) 1. Conform the list of terminal elements in the “Function” column to the functional elements in the existing terminal and to known missing elements desired in the future. 2. Determine amount of space allocated to each terminal function in the existing terminal. Include sizes of appropriate terminal systems, such as length of ticket counter or bag claim devices. Enter in “Existing Inventory” column. 3. Select a base planning year (typically the last year for which full year statistics are available, or the latest month of full statistics, annualized).

Analysis Templates C-3 4. Determine desired planning activity levels for the terminal renew and replace options and calculate passenger and aircraft activity statistics for these planning levels. These planning activity levels are typically measured in terms of MAP or PMAD. 5. Using industry procedures and metrics as outlined above, calculate facility requirements for each desired planning activity level. 6. If the terminal renewal or replacement analysis will not result in an increase in the number of aircraft parking positions, it is often useful to calculate terminal requirements based on the passenger activity limits defined by the number of aircraft parking positions. To determine annual planning activity levels in this manner: a. Multiply the number of aircraft parking positions × 300,000 to 350,000 (if a “spoke” airport); b. Multiply the number of aircraft parking positions × 450,000 to 500,000 (if a hub airport or if a majority of flights are by a large low cost carrier); c. Determine the number of PMAD passengers based on existing annual to PMAD passenger ratios at the airport. 7. Enter results in relevant spreadsheet cells, and identify where additional area and systems are required. 8. Summarize results for development of renew and replace options. C.2 Program Cost Estimation Template (Table C-3) Program costs can be developed in a number of ways, from benchmarking unit costs per square foot or per gate (high level planning estimates) to engineer’s estimates based on plan view drawings to cost estimator’s time and material takeoffs based on completed construction documents. In each type of estimate, it is important to include all related elements of the project from planning and architect and engineer fees to program management, phasing costs, and costs to relocate conflicting functions. It is also important to include contingency estimates for the inevitable unknowns and uncertainties during project development and to match the contingency set-aside with the level of risk that the cost estimate might increase during design or construction. Early plan- ning estimates can vary by as much as 20 percent or more from final costs because of project design changes or unknown site conditions, while final estimates with completed construction drawings might reasonably be estimated within 5 percent of final costs. These contingencies should be included in cost estimates as the project moves from planning to construction and completion. Finally, cost estimates should be updated and recalculated several times during the course of the project. At a minimum, estimates should be updated at typical project milestones, such as alternative concept analysis, design completion, and construction document completion. The Program Cost Estimation Template (Table C-3) is a tool to guide the estimation of program costs during the early stages of the project, typically through evaluation of planning options. It is primarily a unit cost based spreadsheet. To complete the template, planning concept drawings need to be completed to a point where square footages for each major terminal function can be determined and the scale of major terminal systems and equipment (such as inbound and outbound baggage handling systems) can be estimated. Completion of the template also requires knowledge of typical per square foot costs for renovated and newly constructed spaces. These costs vary by • Size of space being renewed or built new, • Degree of desired finish, • Degree of construction complexity,

C-4 Guidebook for evaluating Terminal Renewal Versus Replacement Options • Geographical location, and • Status of construction activity in the economy. Costs associated with construction and terminal operations phasing also need to be con- sidered. Terminal construction phasing costs include required spaces (renovated, temporary, or new) and the costs of relocating terminal operations. Operations phasing costs relate to the inefficiencies of ongoing terminal operations during construction (such as additional staff time) and are best determined through discussions with airport staff and tenants. The template separates the terminal functional spaces into financial cost center categories to maintain a relationship with the financial analysis of costs described in Chapter 9 of the Guidebook. Template Completion Steps and Notes (Table C-3) 1. Review the project and terminal elements in the left-hand column. Add elements from the current project that are not represented. Gather space and cost data related to these elements. 2. If phasing requires that holdrooms and aircraft parking positions be closed for construc- tion, the cost to temporarily replace those positions must be included if no existing unused positions are available. 3. If the location for the temporary aircraft parking positions does not include adequate air- craft apron, costs to construct new apron must be included. 4. Utility hookups to temporary facilities and relocation expenses are also project costs. These costs can be incorporated into the unit costs for temporary facility construction. 5. The costs of constructing replacement facilities for airport functions within any expanded terminal footprint must be calculated as project costs. Demolition of existing adjacent and conflicting structures should be included. 6. “Terminal Rentable Space” includes airline operating areas (ticketing, holdrooms, opera- tions offices, etc.) that are not leased directly to airlines and are typically charged on a per use basis. 7. Design and construction of airline leased space may have different requirements and costs than design and construction of airline common use space and should be reflected in square foot unit costs, to the extent such costs can be determined. However, airline leased and com- mon use spaces can be assumed to have the same square footage costs during early stages of the planning and evaluation. 8. “Building and Operational Systems” typically require professionally prepared estimates. 9. Phasing costs can be roughly estimated as a percentage of construction costs with advice from program managers, airline staff, and airport staff. 10. Project contingency estimates should not be less than 10 percent to 20 percent of estimated construction cost in the early planning phases of a project. Contingency estimates should be distributed among defined construction phases. C.3 Performance Evaluation Template (Table C-4) The number of elements, functions, and characteristics of a terminal that must be considered when alternative concepts or options are being considered indicates that a process is needed to organize the evaluation. The process must take into account: • The goals of the project; what it is intended to achieve, • How well each option meets the terminal’s functional requirements, and • The relative importance of the goals and requirements. Two significant elements in the evaluation are (1) determining a measurable method to rate the various terminal characteristics in a way that is applicable to all measures and (2) determin-

Analysis Templates C-5 ing the appropriate balance of importance among the evaluation measures. Most qualitative measures can be rated in a good/better/best or poor/average/good range; for summary purposes, these ranges can be assigned values from 1 to 5, 1 to 10, or –2 to +2, etc. Typically, low and negative numbers represent poor results and high and positive numbers represent good results. Quantitative measures should also incorporate consideration of relative ranges. For example, a range of required passenger walking distances might be rated 1 for longer walk distances and 5 for shorter walk distances. Measures should be weighted for relative importance. It is easy to bias an evaluation by including more measures related to a particular terminal function than another (for example, including five measures related to the ticketing area but only two measures related to the security screening checkpoint). This effect can be minimized by weighting the mea- sures before the evaluation. Such weighting should be performed by vote of staff and/or stakeholders. The performance evaluation is only one of several analyses and tools used to select the pre- ferred outcome. Others include the financial evaluations and the judgments of senior staff and community leaders. Template Completion Steps and Notes (Table C-4) 1. From a list of project strategic goals, objectives, and facility requirements, select representa- tive measures that characterize the project. This selection should be in conjunction with the facility gap and requirements analyses (discussed in Guidebook Chapters 7). 2. Select a performance rating method for each measure. The template uses 1 low to 5 high. 3. Select a relative weighting for each measure or category of measures. For example, all tick- eting related measures could be counted as one category with one weighting. The mean relative weighting is equal to 1.5. A relative weighting greater than 1.5 signifies an increased importance for this facility relative to the average, and vice versa. 4. Assigned weights should reflect the answers to questions: Is this measure more important than another? Twice as important? Half as important? (Keep in mind that a measure with low performance results but high weighting can produce a higher score than a highly important measure with a low performance rating.) 5. Assign performance values to the measures. 6. Multiply performance values by weighting levels and record the results in the weighted matrix. 7. Total and analyze the results. Cross check the perceived validity of the results. C.4 Project Funding Availability Template (Table C-5 and Table C-6) The purpose of the Project Funding Availability Template is to allow the user to estimate the total funds available for a terminal renewal or replacement project based on operat- ing, growth, project, and financing assumptions entered into the template. The template is designed to account for future available airline revenues, passenger facility charge (PFC) rev- enues, bond proceeds, and other available funding sources, such as Federal Aviation Admin- istration (FAA) grants and state and local funds, to determine the total funding available during construction of the project and to pay debt service on bonds issued for the project. This template contains financially specific decision variables that require knowledge of the airport’s financial position and the overall economic environment. The placeholder assump- tions are related to the City Airport example detailed in the Guidebook and are solely to be used for comparison purposes.

C-6 Guidebook for evaluating Terminal Renewal Versus Replacement Options C.4.1 Input Tab (Table C-5) The Project Funding Availability Input tab allows the user to input all of the required assump- tions and to see the resulting effects on funding availability. Each of the required assumptions, described below, will affect the estimated total funding availability for the project. The user may adjust certain assumptions while holding others constant to determine the effect of those assumptions. Template Completion Steps and Notes (Table C-5) Operating Assumptions 1. Enplaned Passengers—The number of enplaned passengers in the baseline (current) year of the analysis. 2. Current CPE—The total airline cost per enplaned passenger (CPE) at the airport in the baseline (current) year of the analysis. 3. Non-airline Revenues—The total amount of revenues received by the airport operator from other than airline sources in the baseline (current) year of the analysis. 4. Investment Earnings—All earnings gained on cash funds in the baseline (current) year of the analysis. 5. Operating Expenses—The total amount of operation and maintenance (O&M) expenses incurred by the airport operator in the baseline (current) year of the analysis. 6. PFC Collection Rate—The rate at which the airport operator collects a PFC, typically $4.50. This collection rate was assumed to be constant throughout the analysis. 7. Beginning PFC Balance—The amount of uncommitted PFC revenues available to the air- port enterprise at the time of the analysis. 8. Beginning Cash Balance—The amount of uncommitted cash available to the airport enterprise at the time of the analysis. Typically this is the beginning balance of the airport operator’s discretionary fund. Annual cash expenditures may be entered in the “Additional Inputs” section. 9. Entitlements—If the airport received FAA Airport Improvement Program (AIP) entitle- ment grants and those entitlement grants are available to be applied to future projects, then the user enters “Yes;” otherwise, entitlement grants will not be incorporated in the analysis. In calculating entitlement grants in the analysis, the maximum entitlement using the FAA’s enplanement-based calculation is assumed. Growth Assumptions A constant growth rate is assumed throughout the planning period. 10. Enplaned Passenger Growth Rate—The forecasted annual growth in enplaned passengers. 11. Non-airline Revenue Growth—In the analysis template, non-airline revenue growth is equal to enplaned passenger growth plus a fraction for inflation. The user enters the percent- age of inflation affecting growth in the template. For example, if enplaned passenger growth is set at 2.25 percent, inflation is set at 3 percent and 50 percent of inflation is assumed to affect nonairline revenue growth; then, the calculated nonairline revenue growth is 3.75 percent (i.e., 2.25 percent + 1.5 percent). 12. Operating Expense Growth—Operating expense growth is a function of inflation in the template. O&M expenses are assumed to increase at the rate of inflation and the user enters an amount of assumed growth not connected with inflation. For example, if infla- tion is set at 3 percent and expenses are assumed to increase at 1 percent regardless of inflation, then the user enters “1 percent” and the calculated O&M expense growth is equal to “4 percent.” 13. Inflation—The assumed rate of annual inflation; also affects growth in non-airline revenue and O&M expenses.

Analysis Templates C-7 Project Assumptions 14. Project Impact on Non-airline Revenues—The user enters the net impact of the terminal project on terminal non-airline revenues for the year the project becomes fully operational. For example, a terminal project may yield a 10 percent increase in nonairline revenues resulting from additional concession opportunities; in this case, the user enters 10 percent. If a terminal project reduces nonairline revenues, then the user sets the project impact to a negative amount. 15. Project Impact on Operating Expenses—The user enters the net impact of the terminal project on terminal O&M expenses for the year the project becomes fully operational. For example, a terminal project may increase operating expenses 10 percent due to addi- tional terminal square footage; in this case, the user enters 10 percent. If a terminal project reduces O&M expenses, then the user sets the project impact to a negative amount. 16. Targeted Future CPE (non-escalated)—The total airline cost per enplaned passenger tar- geted by the airport operator after the terminal project becomes fully operational. This amount should be entered in current year dollars. 17. Years until Bonds Issued—The number of years, from the current year, until the airport operator plans to issue bonds for the terminal project. The time period between the year bonds are issued and the year the terminal becomes fully operational determines the amount of capitalized interest in the financing assumptions. 18. Years until Project Is Operational—The number of years, from the current year, until the terminal project is fully operational. If the project has multiple phases, the user enters the year in which the last phase is expected to be complete. Financing Assumptions 19. Bond Interest Rate—The assumed interest rate of the bonds issued for the terminal project (e.g., 6 percent). 20. Capitalized Interest Rate—The short term interest rate on debt service capitalized from the issuance of the bonds until the project is operational. Amortization and capitalized interest periods are determined based on the number of years until bonds are issued for the project and until the project is fully operational. 21. Bond Coverage Ratio—Assumed amount of coverage required on annual bond debt service (e.g., 1.25 times annual debt service). 22. Rolling Coverage—User must select “Yes” or “No” from the dropdown menu. “Yes” indicates that the bond coverage account will be funded by bond proceeds and will roll- over each year. “No” indicates that debt service coverage will be collected each year from airline revenues. Rolling coverage is recommended to maximize available funds for the project. Additional Inputs 23. Annual Factors—Other factors that affect total project funding availability, but are not necessarily a fixed amount are included within the additional inputs section. The following items may be entered into the analysis on a year-by-year basis: � Existing debt service to be paid with airport revenues. � Estimated future debt service associated with other projects (e.g., the Capital Improve- ment Program [CIP]). � Existing debt service to be paid with PFC revenues. � Estimated PFC pay-as-you-go amounts for other projects. � Estimated cash expenditures to fund other capital projects (e.g., CIP). � Other available funding sources, such as: FAA discretionary grants, state and local grants, and local cash available to be spent on the terminal project.

C-8 Guidebook for evaluating Terminal Renewal Versus Replacement Options C.4.2 Output (Table C-6) The next tab of the template provides a table that presents the specified assumptions as well as the debt capacity, bond proceeds available for the project, and the total funds available for the project. Each calculation is provided in current year and escalated dollars, along with a graph comparing the two. • Debt Capacity—Represents the total amount of debt the airport operator may issue for the project; this amount is equal to the par amount of the bonds. This amount includes the pro- ceeds for construction, capitalized interest, costs of issuance, and funding the debt service reserve and coverage accounts. • Bond Proceeds Available for Future Project—Represents the amount out of the total debt capacity that can be used to fund project expenditures. • Total Funds Available for Future Project—Represents the full project funding capacity of the airport enterprise. This capacity includes the bond proceeds available for the project, plus excess airport revenues, excess PFC revenues available, and other available funding before and during construction of the project. The annual detail of these revenues is included in the “Capacity-Cash Flow” tab. C.4.3 Template Backup Detail Included in the template are two backup detail tabs showing the cash flow funding availability analysis and the bond proceeds calculation. • Cash Flow Funding Availability—Presents projected total revenues less O&M expenses and debt service for each year, based on the assumptions entered on the Input tab, with a cumulative total of excess revenues available to fund the project. For the year in which the terminal becomes fully operational, the total annual excess revenues would then be used to pay debt service. • Calculation of Bond Proceeds—The debt service amount calculated on the Cash Flow Fund- ing Availability tab is then divided by an amortization factor based on the financing assump- tions input into the template to determine debt capacity. Capitalized interest, bond issuance fees, debt service reserve funding, and debt service coverage account funding are subtracted to calculate the bond proceeds available for the project. The cumulative total funds available for future projects in the year the project becomes fully operational is added to the calculated amount of bond proceeds to produce the total funds available.