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10 CHAPTER TWO SURVEY RESULTS This study investigated airports that were assumed to have aviation industrial development on their airfields. It identified airports with successful development(s) and sought to learn what types of projects were developed and what funding mechanisms or combinations of mechanisms were used. The survey was sent to 64 airports; 53 responded, for a completion rate of 83%. WHAT IS THE GOVERNANCE FORM OF YOUR AIRPORT? Twenty-four (45%) of the airports responding are governed by cities and counties, and 19 (36%) are governed by airport or aviation authorities. The remaining airports are governed by port authorities, economic development authorities, private corporations, and âotherâ (Figure 3). The airports were asked if they are a joint use military facility; 12 (23%) responded yes and 41 (77%) responded no. When asked if their airport is a former military airfield, 32 (60%) said yes and 16 (40%) said no. These responses indicate that many of the airports had been military installations. However, 30 airports (57%) indicated that the transfer to public ownership occurred before the Base Realignment and Closure Commission activities began in 1987. This is significant because BRAC-associated transitional funding mechanisms have not been available during the past 20 years, when most of the industrial aviation development has occurred at the study airports. FIGURE 3 Governance form (Kenville and Smith data). TYPES OF INDUSTRIAL DEVELOPMENT Industrial Aviation Development Forty-five airports (85%) indicated that they had industrial aviation activity, and 40 of these (89%) reported that the activity is related to some type of maintenance, repair, and overhaul services facility. Twenty-six airports (58%) reported special- ized aviation service operations such as painting or interior completion; 16 airports (40%) provide aviation warehousing; 13 (33%) reported aircraft fabrication and development; and 12 (29%) reported aircraft manufacturing and assembly. The airports were asked to âCheck all that applyâ and the data clearly indicate that the overwhelming type of development is
11 in support of the aircraft industry, very likely connected to aircraft and aviation maintenance activities. Several survey respondents used the âOtherâWrite Inâ selection to list other types of industrial aviation activities (see Figure 4). FIGURE 4 Types of industrial activity (Kenville and Kenville data). FIGURE 5 Types of development actively seeking (Kenville and Smith data).
12 When respondents were asked about what types of development they were currently seeking, the answers mirrored the types discussed earlier, and the results can be seen in Figure 5. Totals may exceed 100%, as airports were asked to mark all types of development they are seeking. The three columns marked âOtherâWrite Inâ include a number of non-aviation indus- trial development activities, some duplicates of the categories listed in the question, and other uses not pertinent to this study. Responses were geared toward aeronautical development, which may be linked to FAA eligibility requirements. When the airports seeking development were asked what type of infrastructure would be needed, the most common answer was construction of new buildings (67%) followed by new utilities, new roads, and modifications of existing structures. Thir- teen airports (25%) cited construction of new runways, aprons, taxiways, or towers, as shown in Figure 5. Totals may exceed 100%, as the airports could mark all types of development they had. The survey did not address the issue of airports leaving a facility development and management role in favor of a property management role. When asked if the airports had other types (i.e., non-aviation types) of industrial development, 39 (74%) indicated that they did. Those developments were varied and included cargo facilities, government entities, land and air parks, distribution centers, manufacturing, a community college, museums, non-aviation business parks, small business incubators, and ship- ping/warehouse facilities. Details of the types of funding used for infrastructure for such non-aviation development are not available in the survey data. Types of Funding Used The airports were asked what type(s) of funding sources they had used to pay for the infrastructure required. There were many responses to this question, but the predominant sources were airport capital funds (58%), ground leases (42%), direct private investment (40%), Airport Improvement Program funds (38%), state aviation and economic development grants (38%), federal grants and loans (23%), state grants for public infrastructure (19%), public-private partnerships (17%), and developer funding (17%) (Table 2). The airports could list more than one source; typically, airports combine several sources of funding for their industrial development. The airports were asked to use a scale of one to five stars to rate the desirability and effectiveness of the funding sources used in their industrial development. Table 3 lists the top-rated funding methods. Four funding sources not in the survey were listed by airports as both desirable and effective: line-item appropriation by the state, local property tax millage, redevelopment bonds, and throughput and concession fees. When the airports were asked to define the âeffectivenessâ of the funding methods, the prevalent themes were ease of use and implementation, availability of funds, flexibility of use, and ability to achieve the goals of the project. Airports were asked if any sources of available funds were not tapped because of restrictions or conditions deemed unacceptable; 21% of the respondents said âyes.â Some negative answers were related to AIP and PFC restrictions and to the inability of some agencies and orga- nizations to respond quickly. As discussed in chapter three, combining state and federal aviation funds was desirable in some instances. The amount of legal documentation was viewed as negative but necessary; in addition, some airports commented that some of the sources had conflicting conditions and requirements, which further slowed and complicated the process. Issues of education of other agencies and organizations arise when an airport uses private funds in combination with public resources. Airports that combined AIP funds with another source of funding indicated that as long as the airport was able to delineate what the AIP funds were used for, the project worked out well. Another issue identified with AIP was availability; combining these funds with other federal funds can be tricky, as they often have different deadlines, conditions, and requirements. Justification and eligibility issues can be a problem when airports attempt to use both AIP and state funds, as the fundersâ priorities may differ. Governance and Cross-Utilization Six airports (11%) indicated that they had to make changes in their governance structures to enable aviation industrial devel- opment, and 48 airports (90%) said that no land swaps were required for the development. Six airports (11%) indicated that they cross-qualified their eligibility between airports in their system of airports. Twenty airports (38%) are not part of a multi- airport system. Of the six airports that are part of a system, four airports were successful in utilizing funds from one airport on another airport in their system.
13 Fourteen airports (26%) indicated that âthrough-the-fenceâ (TTF) agreements had been a factor in industrial development. Just over half of the surveyed airports were required to update their airport layout plan (ALP) to accommodate industrial development. Twenty-six airports (49%) indicated that restrictive grant assurances were not a factor in their approach or in the outcome of their project, while 20 airports (38%) said that the grant assurance did present issues in their projects. When asked about these issues, airports indicated that coordination with granting agencies was the key factor and that releasing land was usually the biggest factor. Only 13 airports (25%) have specific programs at their airports designed to attract industrial development and start-up businesses. TABLE 2 INFRASTRUCTURE FUNDING METHODS USED Type Percent Count AIP 37.7 20 Agricultural lease 11.3 6 Airport capital funds/equity 58.5 31 Airport improvement trust 3.8 2 Airport privatization (partial or full) 3.8 2 Airport revenue bonds 9.4 5 Bank loan to airport 5.7 3 Commercial association 1.9 1 Commercial paper 3.8 2 Developer funded by directed cash and bank loan as lease condition 17.0 9 Direct private investment 39.6 21 Economic development bonds 9.4 5 Federal grants and loansâEDA 22.6 12 Federal grants and loansâUSDA 5.7 3 Federal grants and loansâother (not FAA, EDA, or USDA) 3.8 2 Free Trade Zone (FTZ) 15.1 8 General obligation bonds 13.2 7 Ground lease 41.5 22 Industrial bonds 1.9 1 Industrial development bonds 3.8 2 Loans from airport sponsor 7.5 4 Local improvement district (LID) 1.9 1 Local income tax revenue (CEDITâCity or County Economic Devel- opment Income Tax) 7.5 4 Mineral or petroleum royalties 1.9 1 New markets tax credit 1.9 1 Outside sponsorship 1.9 1 Passenger facility charges (PFCs) 7.5 4 Public-private partnership (PPP, P3) 17.0 9 Sale of utility or other services 5.7 3 Special facility bonds 7.5 4 Special tax district 3.8 2 State aviation grants 37.7 20 State economic development grants 37.7 20 State grants for public infrastructure 18.9 10 State infrastructure bank loans 3.8 2 State loans 3.8 2 Tax increment financing (TIF) 7.5 4 Source: Kenville and Smith data (2016).
14 Current Projects and Indicators of Success Twenty-three airports (43%) are currently pursuing aviation industrial projects, typically MROs, SASOs, hangars, and air- craft manufacturing facilities. Respondents most frequently mentioned seeking MROs or some type of aircraft maintenance facility or hangar, which parallels the most common types of existing development. When the airports were asked about timelines for their most recent aviation industrial projects, the results were mainly in the 0â3 year range, with some projects taking up to 5 years, as illustrated in Figure 6. FIGURE 6 Time to completion (Kenville and Smith 2016 data). The airports were also asked if they viewed their most recent project as a success. More than 54% viewed their project as a success, 36% thought it was looking good but was too soon to tell, and 5% thought the project was not looking good but it was too soon for a final answer (Figure 7). The 22 airports that responded to questions about their most recent projects were asked, âWhat constitutes a success?â Their answers, in order of decreasing importance, are shown in Table 4. TABLE 3 TOP-RATED FUNDING METHODS FOR DESIRABILITY AND EFFECTIVENESS Desirability Effectiveness Direct private investment 5 stars 4.5 stars Ground leases 4.5 stars 4.5 stars AIP 4.5 stars 4 stars State grants for public infrastructure 4.5 stars 4 stars Public-private partnership (PPP/P3) 4 stars 4 stars Developer funded 4 stars 3.5 stars State aviation grants 4 stars 3.5 stars Airport capital funds 3.5 stars 4 stars Federal grants and loans (EDA) 3.5 stars 3.5 stars Passenger facility charge (PFC) 3.5 stars 3.5 stars Foreign Trade Zone (FTZ) 3.5 stars 3 stars Airport revenue bonds 3 stars 4 stars Source: Kenville and Smith data (2016).
15 The airports were also asked whether they had a quantitative metric or performance indicator for the measurement of suc- cess. Fifty-nine percent did not have a metric to determine whether the project was successful, but eight airports did use a metric. The airports that use a metric tend to use return on investment (ROI), especially job creation. For example, Kelly Field at Port San Antonio uses number of jobs created divided by dollars invested, where the success criterion is one job created per $10,000 invested (R. Crider, personal communication, Sept. 2, 2016). FIGURE 7 Recent project a success (Kenville and Smith 2016 data). Of the 22 airports that answered questions about their most recent projects, 12 airports (54%) did not use a consultant for their project, while 10 airports (45%) did. However, the survey question did not differentiate among types of consultants (general airport development, industrial development, or financial). A final question for the responding airports was âWould you embark on a similar project?â The overwhelming majority (20 airports, 91%) said they would do it again. Two airports (9%) said it was too soon to know. None of the airports said no. TABLE 4 PROJECT SUCCESS ATTRIBUTES Rank What Is Success? Airports 1 Jobs added 20 2 Goals and objectives achieved 18 3 Increased revenues 17 3 Enhanced reputation of airport 17 5 Enhanced visibility of airport 16 6 Good publicity 15 6 Greater political support from sponsor 15 8 Improved priority for state funding 12 9 Higher credit rating 11 Source: Kenville and Smith data (2016).