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16 CHAPTER THREE DISCUSSION OF SURVEY RESULTS AND FLORIDA CASE EXAMPLE INTRODUCTION The 53 airports that contributed data to the study are located in 22 states (Figure 2 and Appendix A), with Florida (10 air- ports), California (nine airports), and Texas (five airports) being the most heavily represented in the survey results. Before distributing the survey, the researchers determined from the literature review and from the advice of the topic panel that Florida and California were good candidates for a case example, so an effort was made to have a solid representation of all types and sizes of airports from those two states. After consultation with the state aviation offices in Florida and California, Florida was chosen as the case example for this synthesis. Florida was selected for the following reasons: 1. The literature review showed that Florida airports have had notable success in the recent past in landing significant new industrial aviation projects and expanding existing operations. 2. The Florida Aviation and Spaceports Office in the Florida Department of Transportation noted that Florida airports use a very wide range of funding mechanisms and combinations of funding methods on each project. The Aviation and Spaceports Office takes a highly aggressive approach to state funding eligibility. 3. Each of the Florida airports has at least one of the development types included in the definition of industrial aviation, and most of them have several. 4. Florida airports with industrial aviation activity are of all types and sizes, falling into six of the seven NPIAS categories. 5. Florida is not an FAA AIP block grant state; however, Floridaâs policy of funding airports of all sizes gives the state significant influence. Before we present the Florida case example, two caveats are needed. These points were raised by the topic panel and confirmed by the Florida Aviation and Spaceports Office. Florida is unusual in two aspects compared with all other states: 1. Floridaâs state funding for airports per year approximately equals the total for the next five highest states combined (R. Crider, personal communication, May 16, 2016; A. Keith, interview, Sept. 29, 2016). Table 5 illustrates the relative amounts of state funding. During the current Florida 5-Year Work Plan, 45% of funding comes from state aviation and Strategic Intermodal System grants, 37% from local sources, and 18% from the FAA. 2. Florida has a single transportation trust fund for all four modes of transportation (including aviation), and each mode is guaranteed at least 15% of the total available funds per year. Nearly all state transportation-related revenues (e.g., gasoline tax, aviation fuel tax, fees) go into this fund; for example, 8% of aviation fuel tax revenues go into the stateâs general fund (A. Keith and J. Halley, interview, Sept. 29, 2016; J. Halley, personal communication, Nov. 18, 2016). Preliminary discussions with the Aviation Development Section of the Aviation and Spaceports Office identified 12 air- ports in Florida that have been actively involved in industrial aviation development and that use a variety of funding mecha- nisms: FAA funds, state aviation funds, state economic development funds, local funds, and other types of funding. The state agency encouraged the 12 airports to participate in this study, and 10 of them did so. Based on preliminary FAA FY15 enplanement data and FY15 cargo and freight data, the 10 participating airports represent airports of nearly all types and sizes. The six general aviation airports represent three of the four GA asset categories (FAA 2014b, 2016): local, regional, and national. Table 6 shows the 10 airports and their categories.
17 TABLE 5 AVIATION FUNDING BY STATES IN 2015 State No. of Airports State Funding (self-reported) Florida 780 $337,961,446 Maryland 140 160,274,000 Texas 772 84,340,185 Tennessee 79 30,000,000 Louisiana 585 29,775,000 New York 462 24,115,000 Remaining states 5,690 228,889,765 National total 8,508 $895,355,396 Source: National Association of State Aviation Officials (NASAO) data, adapted by Kenville and Smith (2016). TABLE 6 CATEGORIES OF FLORIDA AIRPORTS IN STUDY Airport Airport Identifier NPIAS Service Level GA Asset Classification Airglades Airport 21S General aviation Local Lake City Gateway Airport LCQ General aviation Regional Lakeland Linder Regional Airport LAL Reliever National Miami International Airport MIA Large hub N/A Ocala International/Jim Taylor Field OCF General aviation Regional Orlando Melbourne International Airport MLB Non-hub primary N/A Palm Beach International Airport PBI Medium hub N/A Pensacola International Airport PNS Small hub N/A Treasure Coast International Airport FPR General aviation National Vero Beach Regional Airport VRB General aviation Regional Source: Kenville and Smith data (2016). N/A = not available. RATES AND CHARGES When asked how industrial development factors into the calculation of the airportâs rate and charges, some airports indicated that it is reflected in ground leases. Overall, airport charges are not affected by industrial development; the issue of how costs for infrastructure for industrial aviation development affect rates and charges is specific to each airport. If an airport has air- line service, it is required to consult with its airlines on which development charges the airlines are willing to have included in the general rates and charges, and the result of this consultation must be documented to the FAA. Several airports use profes- sional appraisers, as the development is industrial and not specifically aviation. Some airports keep the industrial financial piece separate from the airportâs general rates and charges calculations, while others use leases with industrial tenants to offset the airfield rates and charges to regular aeronautical users. Overall, the responses to this question were a mixed bag. A number of airports do not factor in their industrial development, while others use it to offset charges to the regular users of the airport. INDUSTRIAL AVIATION IN FLORIDA Aviation is an important segment of Floridaâs economy. In 2014, the total direct and indirect economic benefits of aviation in Florida were 1,312,431 jobs, $44.5 billion in payroll, and $144 billion total output. Aviation businesses, which include indus- trial aviation activities, provided 76,217 jobs, $2.8 billion in payroll, and $13.6 billion total output (FDOT 2014). Industrial aviation is not broken out as a separate category. Because of aviationâs economic importance, successive governors and leg- islatures have made it a priority to ensure funding not just to help match FAA grants but also to help Florida airports develop other sources of revenue so they can increase their viability and create jobs.
18 The basic reference on airport development and state funding in Florida is the Florida Aviation System Plan (FASP 2025), which is developed and maintained by the Florida Aviation and Spaceports Office. For an airport to receive state funding through Floridaâs aviation grant program, it must be included in the FASP. Nearly all states have a similar statewide plan. The Continuing Florida Aviation System Planning Process (CFASPP, http://www.cfaspp.com) is a voluntary, coopera- tive planning and information-sharing system among the airports. Participation is voluntary, although FDOT encourages all public use airports to participate. Other partiesâsuch as the FAAâs Airports District Office (ADO), military bases or units, regional planners, and consultantsâmay participate as well. The airports run the CFASPP; FDOT provides technical and administrative assistance (J. Halley, interview, Sept. 22, 2016). The CFASPP provides continuous stakeholder input into the FASP. CFASPP has nine regional meetings and one statewide meet- ing every 4 months for a total of 30 meetings a year. Information on programs, funding sources, changing requirements, ongoing statewide aviation projects and studies, and lessons learned flows in all directions, not just as input to the FASP. The FAA ADO always attends the statewide meetings and participates in many of the regional meetings. When the FAA cannot attend a regional meeting, it provides briefing points and learns about the discussions through meeting minutes that are posted on the CFASPP web- site (J. Halley, interview, Sept. 22, 2016). Through the CFASPP, the state office is kept informed of emerging issues. In addition to the knowledge shared through the CFASPP, the Aviation and Spaceports Office and the FAA ADO interact in three other ways that benefit Florida airports. First, the stateâs district aviation coordinators have annual work program develop- ment meetings to which they invite ADO program managers and planners. Second, the ADO has representatives on all the stateâs advisory committees for projects, guidebooks, and other initiatives. Third, the state office often arranges one-on-one meetings with ADO staff to discuss FAA considerations with regard to the stateâs many projects (J. Halley, interview, Sept. 22, 2016). The Florida Aviation and Spaceports Office is proactive in its interactions with the FAA and with airports in Florida, particularly with regard to airport master planning and airport layout plans (ALPs) (T. Cox interview, Aug. 29, 2016). The Aviation Development Section believes that having a great relationship with the FAA ADO has been a key factor, perhaps the key factor, in the ability of Florida airports to successfully use AIP funding in combination with state funds for industrial aviation projects. The Aviation and Spaceports Office attributes this success to the following factors: 1. The proactive nature of the relationship. 2. Open communication. 3. The involvement of the FAA ADO in everythingâasking them to preview state program elements that will involve FAA approval as well as those that are purely state decisions. For example, the state asked the ADO to review the update to the Florida Master Planning Guidebook. 4. The fact that the first priority for the use of state grant funds is to maximize the allocation of federal funds. 5. The fact that Florida has one FAA ADO that serves the state and is not shared with adjoining states. The FASP 2025 establishes seven goals for the system of airports in the state: 1. Provide efficient, safe, convenient, and secure airports. 2. Contribute to sustainable growth while remaining sensitive to the environment. 3. Enhance Floridaâs leadership and prominence in the aviation industry. 4. Protect airspace and promote compatible land use planning around Florida airports. 5. Support new technologies and innovations in aviation. 6. Promote aviation to business, government, and the public. 7. Foster Floridaâs reputation as a military-friendly state.
19 Running through these strategic goals are the importance of Floridaâs airports for direct and indirect job creation and an emphasis on the intermodal aspects of transportation in the state. âStrategic plans for Floridaâs airports highlight the need to regularly update long-range plans. Strategic planning initiatives that are completed or underway for airports in the Florida system are compatible with and supportive of the FASP 2025 goal for a well-planned airport systemâ (FDOT 2010). The FASP 2025 identifies nine service roles for each airport in Florida. The four commercial service roles are tourism, business, air cargo, and international. The five general aviation roles are flight training, corporate, tourism, recreational/ sport, and business/recreational. Although the FASP and the CFASPP discuss industrial aviation development activities and potential activities in passing, industrial aviation is not included as a service role. INDUSTRIAL AVIATION AT 10 FLORIDA AIRPORTS Airglades International Airport (21S) Airglades International Airport is part of the Airport Privatization Pilot Program (www.faa.gov/airports/airport_compliance/ privatization) and is the only one of the five originally designated airports still in the program. It currently has no industrial aviation facilities, but airport management wants to establish an industrial complex on 700 acres of airport property. The most ambitious part of this plan is to become a major international air cargo facility with aviation warehousing, cold port, and intermodal facilities. Development officials are trying to develop a P3 perishable air cargo complex. This development envisions new construction of buildings, runways, aprons, taxiways, tower, utilities, and access roads. The development will require major modification of existing structures other than hangars, as well as provision of services. The airport has not yet obtained any federal, state, or local funding for these projects. Airglades has no website. Lake City Gateway Airport (LCQ) LCQ supports a 12-acre industrial park onsite. The airport has one very large MRO activity, which required major modification of an existing hangar. Although LCQ has the GA asset classification of âregional,â the magnitude of its MRO activities and the size of the aircraft serviced make the airport important on a national scale. LCQ has used airport capital funds/equity, direct pri- vate investment, USDA grants and loans, state aviation grants, and state economic development grants to fund infrastructure to support industrial aviation development. Airport website: http://www.lcfla.com/index.php/departments/gateway-airport-klcq. (A detailed description of LCQâs industrial aviation activity and its very large MRO tenant is provided at the end of this chap- ter to illustrate the scope and importance of industrial aviation to an airport, a community, and the communityâs institutions.) Lakeland Linder Regional Airport (LAL) LAL is a âone-stop shopâ for aviation services, including MRO services, specialized aviation services, aviation warehousing, and UAS platform development. The services required infrastructure funding for new buildings, new utilities, and new access roads. LAL used funding from AIP, airport capital funds/equity, ground leases, loans from airport sponsor, state aviation grants, and state economic development grants to fund infrastructure to support industrial aviation development. Airport website: http://www.lakelandairport.com. Miami International Airport (MIA) MIA provides aircraft maintenance services and faces increasing demand for such facilities. The demand is driven by the immense activity occurring on and around the airport. Its present industrial aviation activities include MRO services, spe- cialized aviation services, aviation warehousing, cold ports, engine repair, engine test cells, and ground support equipment (GSE) repair and leasing. Infrastructure improvements for industrial aviation development have included new buildings, new utilities, new access roads, major modifications of existing hangars, major modifications of other types of structures, and provision of services. MIAâs most recent major industrial aviation project was the conversion of a very large hangar to an MRO/SASO facility for large cargo planes. The major funding sources have been airport revenue bonds, developerâs funds directed as a lease condition, and a state aviation grant and state intermodal grant. Airport website: http://www. miami-airport.com.
20 Ocala International Airport/Jim Taylor Field (OCF) OCF does not currently have industrial aviation facilities but is actively seeking MRO and specialized aviation services, aircraft manufacturing and assembly, aircraft fabrication and development, aviation warehousing, cold ports, logistics, and distribution facilities. OCF has invested in new construction of buildings, new utilities, and new access roads using funding from airport capital funds/equity, general obligation bonds, loans from airport sponsor, state aviation grants, and state eco- nomic development grants. Airport website: http://www.ocalafl.org/airport. Orlando Melbourne International Airport (MLB) MLBâs industrial aviation development involves MRO services, aircraft manufacturing and assembly, and aircraft fabrication and development. The airport has recently become the site of a major aircraft manufacturing and assembly facility. Infrastruc- ture required was new construction of buildings and major modification of existing hangars. MLB used AIP, airport capital funds/equity, EDA grants and loans, ground leases, state aviation grants, and state economic development grants for its latest expansion of industrial aviation development. Airport website: http://www.mlbair.com. Palm Beach International Airport (PBI) PBI has an MRO service as its industrial aviation activity and is seeking additional MRO and SASO services. The develop- ment required new construction of buildings, new utilities, and new access roads. PBI has used PFCs and state aviation grants to fund industrial aviation infrastructure. Airport website: http://www.pbia.org. Pensacola International Airport (PNS) PNS has an MRO service that required new construction of buildings, runways, aprons, taxiways, utilities, and access roads. The airport is in the process of acquiring through voluntary sales a 65-acre parcel adjacent to the airfield. This will become the Airport Commerce Park and is expected to serve industrial aviation development. Airport website: http://flypensacola.com. Treasure Coast International Airport (FPR) FPR has nearly 3,700 acres available for development of infrastructure and aviation-related business activities. Part of the air- port and surrounding area is a Foreign Trade Zone. FPR has MRO and SASO services, aircraft manufacturing and assembly, aircraft fabrication and development, and aviation warehousing. Infrastructure requirements for industrial aviation develop- ment were new construction of buildings, new construction of runways and aprons, new utilities, new access roads, and major modification of existing hangars and other structures. FPR used AIP, airport capital funds/equity, airport privatization (par- tial), direct private investment, economic development bonds, EDA grants and loans, ground lease, loan from airport spon- sor, public-private partnership, special facility bonds, state aviation grants, and state economic development grants. Airport website: http://www.stlucieco.gov/departments-services/a-z/administration/airport. Vero Beach Regional Airport (VRB) VRB has MRO services, SASO services such as painting and interior completion, aircraft manufacturing and assembly, aircraft fabrication and development, avionics, and general aviation warehousing. Infrastructure requirements for industrial aviation development were new construction of buildings, new construction of runways and aprons, new utilities, new access roads, and major modification of existing hangars and other structures. VRB used AIP, airport capital funds/equity, direct private investment, ground lease, mineral royalties, public-private partnership, state aviation grants, and an appropriation for a new air traffic control tower. Airport website: http://verobeachairport.org. Foreign Trade Zones Many of these airports (LCQ, OCF, MLB, PBI, PNS, and FPR) are within or adjacent to FTZs (http://enforcement. trade.gov/ftzpage/letters/ftzlist-map.html#florida). MIA is surrounded by an FTZ and working to set one up (http:// www.miamitodaynews.com/2016/04/19/miami-international-airport-works-set-foreign-trade-zone). Many airports were early adopters of FTZs. This study did not review the direct or indirect benefit an FTZ may or may not bring to an airport.
21 A Closer Look at Lake City Gateway Airportâs Industrial Aviation Facility LCQ is a general aviation airport (GA asset code âregionalâ) in north central Florida near the intersection of Interstates 10 and 75. LCQ has two asphalt runways. The main runway is 8,003 ft long by 150 ft wide, with a double-tandem weight limitation of 250,000 pounds. The airportâs tower (funded by HAECO, the airportâs primary industrial aviation tenant) is manned from 8:00 a.m. to 4:30 p.m. Monday through Friday. HAECO also maintains the taxiways, parking ramps, and run-up areas. Two state agencies and a medical helicopter transport company maintain bases at LCQ. LCQ is a former military airfield (Naval Air Station Lake City) that was transferred to Lake City in 1946. Almost immedi- ately, Aero Corporation occupied the former military hangars and performed aircraft modification and rehabilitation, mostly on military aircraft, continuing until the late 1980s. Aero was acquired by Timco, which specialized in maintenance and repair of Boeing and Airbus commercial aircraft (Figure 8). Timco was acquired by HAECO Americas, which is the current operator of the very large MRO facility. FIGURE 8 Rows of new airliner seats awaiting installation at Lake City Gateway Airport (HAECO photo). HAECO has approximately 1,500 employees at LCQ, working around the clock in three shifts. Using more than 600,000 sq. ft of covered hangar space in six hangars and more than 1.3 million sq. ft of apron, the HAECO complex performs airframe MRO services, inspections, interior modifications, airframe modification, and stripping and painting (Figure 9). As many as 24 aircraft can be worked on at once. In July 2016, HAECO announced that it will add 400 new positions and invest $2 million at LCQ. FIGURE 9 HAECO hangars at Lake City Gateway Airport (Source: HAECO).
22 HAECO anticipates a major challenge in finding skilled labor to support growth and replace retirees. To address this prob- lem, HAECO has joined with the airport, the Lake CityâColumbia County Chamber of Commerce, and the three surround- ing county school districts to form the Tri-County Aviation Academy (Figure 10). (The company and the airport previously worked with Florida Gateway Community College on courses and training programs to support HAECOâs needs.) The first class has been admitted to the academy, and students will receive hands-on experience at HAECO. FIGURE 10 Opening of Tri-County Aviation Academy (Source: HAECO). The state of Florida (FDOT 2014) has measured the direct economic impacts of LCQ as 2,189 jobs and $189,796,000. LCQâs total (direct, indirect, and induced) economic impact is $316,551,000. The HAECO payroll of $116,276,000 represents nearly 10% of the total Columbia County personal income; however, HAECO draws employees from at least a three-county area. Discussions during a site visit to LCQ on September 26, 2016, identified two major concerns related to industrial aviation development: finding sufficient skilled labor and determining fair market value for facility rents. HAECO, the airport, and their partners are creatively addressing the labor supply issue by supporting programs at the community college and the new aviation academy. The fair market value issue (which the Florida Aviation and Spaceports Office says is a recurring issue at most airports in the state) is resolved by following the Guidelines for Determining Market Value and Market Rent of Airport Property prepared by the University of South Floridaâs Center for Urban Transportation Research (2012) and all state and FAA grant assurances. One fundamental problem is the lack of local comparables. Typically (and this is true at Lake City), the airport is its own comparable. The airport has been well served over the years by close collaboration with its city, the state, and the FAA, and by the Continuing Florida Aviation System Planning Process. However, when it comes to fair market value, economic development practices involving incentives can cause problems with the computation (R. Luster, interview, Sept. 26, 2016). Developing fair market rents rather than fair market value may mitigate this issue. Thus far, such conflicts at LCQ have been successfully resolved, as evidenced by the continued investments by HAECO at the airport. DEVELOPMENT FUNDING IN FLORIDA AND OTHER STATES The raw data from the survey are presented in Appendix B. The data have been anonymized. The numerical data have been aggregated. Free-form answers have been reproduced but identifiers to specific airports have been deleted. For this chapter, numerical data have been extracted for 10 Florida airports and for 43 airports from other states. For some questions, only eight or nine of the Florida airports responded. Governance Form The responding Florida airports are likelier to have a city or county as their sponsor than the 43 airports in other states (78% to 38%) and less likely to be an authority (11% to 51%). Authorities are legal in Florida and are established by legislative action; technically,
23 in Florida an authority is a special district. A possible result of the airports in the study not being authorities may be an easier rela- tionship between airports and other city or county departments, such as economic development departments (see Table 7). TABLE 7 COMPARISON OF GOVERNANCE FORMS Governance Form Florida Other States City department 56% 25% County department 22% 14% Airport, aviation, or port authority 11% 44% Economic development authority â 7% Private corporation 11% 2% Other (commission; special district) â 9% Source: Kenville and Smith data (2016). Current Industrial Aviation Activity There is little difference in the types of industrial aviation activity currently found at the Florida airports compared with activi- ties found at the other 43 airports (Table 8). Activities that create the most jobs are favored, with MRO services leading the list. The largest number of âOtherâ industrial aviation activities outside Florida involved engine remanufacturing. TABLE 8 CURRENT INDUSTRIAL AVIATION FACILITIES Florida Other States Maintenance, repair, and overhaul (MRO) 82.5% 91.7% Specialized aviation service operations/operators (SASOs) 50.0% 61.1% Aviation warehousing 37.5% 38.9% Aircraft fabrication and development 37.5% 33.3% Aircraft manufacturing and assembly 37.5% 27.8% UAS platform development 12.5% 2.8% None/not applicable 12.5% â Cold ports 0% 5.6% Spaceport 0% 5.6% Other â 41.7% Source: Kenville and Smith data (2016). Types of Development Being Sought Although the types and frequencies of existing industrial aviation activities at Florida airports mostly resemble those at the other 43 airports, striking differences appeared when the airports were asked which types of development they are now seek- ing. Florida airports reported markedly greater efforts to attract MRO services, aviation warehousing, and cold ports (Table 9). MRO services appear to be attractive because they are major job generators, while the popularity of aviation warehousing and cold ports may be related to Floridaâs special roles associated with trade in goods, especially perishable goods, with Latin America and the Caribbean. In Florida, âOtherâ types of aviation development being sought are logistics and distribution facilities. One airport outside Florida reported developing infrastructure of nonspecified future industrial aviation development under âOther.â Infrastructure Required for Industrial Aviation at Airports In general, Florida airports report higher frequencies of major infrastructure changes to attract or support industrial aviation development (Table 10). The Florida airports are much more likely than the airports in other states to build new buildings,
24 runways, aprons, taxiways, towers, utilities, and access roads and to make major modifications to existing buildings other than hangars. TABLE 9 AVIATION FACILITIES BEING SOUGHT Florida Other States Maintenance, repair, and overhaul (MRO) 88.9% 55.8% Specialized aviation service operations/operators (SASOs) 44.4% 51.2% Aircraft manufacturing and assembly 55.6% 46.5% Aircraft fabrication and development 44.4% 44.2% Aviation warehousing 44.4% 30.2% Cold ports 22.2% 7.0% UAS platform development 0% 9.3% Spaceport 0% 0% Other 22.2% 1.8% None/not applicable 11.1% 20.9% Source: Kenville and Smith data (2016). TABLE 10 INFRASTRUCTURE CHANGES TO SUPPORT INDUSTRIAL AVIATION DEVELOPMENT Florida Other States No new construction or major modifications 11.1% 17.1% New construction of buildings 88.9% 64.3% New construction of runways, aprons, taxiways, or towers 44.4% 22.0% New utilities 77.8% 48.8% New access roads 77.8% 41.5% Major modifications of existing hangars 44.4% 41.5% Major modifications of existing structures other than hangars 33.3% 19.5% Provision of services 11.1% 12.2% Relocation of tenants â 2.4% Source: Kenville and Smith data (2016). Funding Sources for Infrastructure for Industrial Aviation Development The 2016 Florida Aviation Project Handbook is the basic reference for the multiple state funding sources available to Floridaâs airports. It describes funding sources, availability, eligibility requirements, and application procedures. Two funding catego- ries are particularly pertinent to this study: the Strategic Airport Investment Program and Aviation Economic Development: Program 99. The Strategic Airport Investment Program allows FDOT to fund strategic airport investment projects up to 100% for any publicly owned airport in the FASP if the project meets all four of these criteria: â(1) provides important access and on-airport capacity improvements; (2) provides capital improvements to strategically position the state to maximize opportunities in international trade, logistics, and the aviation industry; (3) achieves state goals of an integrated intermodal transportation system; and (4) demonstrates the feasibility and availability of matching funds through federal, local, or private partnersâ (FDOT 2016, pp. 16â17). Program 99 permits up to 50% state share grants for GA airports âto develop facilities that will produce airport revenue and encourage positive community economic impact, with non-aeronautical projects being eligibleâ (FDOT 2016, p. 21). In addition to Florida aviation grants, the handbook describes the Strategic Intermodal System fund, State Infrastructure Bank, Transportation Regional Incentive Program, Economic Development Transportation Fund and Rural Economic Development Initiative Funds.
25 TABLE 11 FUNDING SOURCES USED TO PAY FOR INFRASTRUCTURE FOR INDUSTRIAL AVIATION DEVELOPMENT Florida (%) Other States (%) Agriculture lease 11.1 11.6 Airport capital funds/equity 77.8 55.8 Airport Improvement Program (AIP) 55.5 34.9 Airport improvement trust 0 4.7 Airport privatization (complete or partial) 22.2 0 Airport revenue bonds 0 9.3 Bank loan to airport 0 7.0 Commercial paper 0 4.7 Developer funded by directed cash and bank loan as lease condition 0 18.6 Direct private investment 33.3 41.9 Economic development bonds 11.1 9.3 Federal grants and loansâEDA 22.2 23.3 Federal grants and loansânot FAA, EDA, or USDA 0 4.7 Federal grants and loansâUSDA 11.1 4.7 Foreign Trade Zone (FTZ) 0 18.6 General obligation bonds 11.1 14.0 Grant from sponsor 0 2.4 Ground lease 44.4 41.9 Industrial development bonds 0 4.7 Infrastructure charges to tenants 0 2.4 Line-item appropriation (ATC tower) 22.2 0 Loan from airportâs sponsor 33.3 0 Local economic development grant 11.1 2.4 Local income tax revenue (CEDIT) 0 9.3 Local sales tax for transportation 0 2.4 Mineral or petroleum leases 11.1 0 Passenger facility charges (PFCs) 11.1 7.0 Private foundation grant 0 2.4 Public-private partnership (P3, PPP) 22.2 16.3 Redevelopment bonds 0 2.4 Sale of utility or other services 0 7.0 Special facility bonds 11.1 7.0 Special tax district 0 4.7 State aviation grants 77.8 30.2 State economic development grants 66.7 32.6 State grants for public infrastructure 0 23.3 State infrastructure bank loans 0 4.7 State loans 0 4.7 Tax increment financing (TIF) 0 9.3 Source: Kenville and Smith data (2016). Note: The four funding sources with greatest difference between the 10 Florida airports and the 43 airports in other states are italicized. Table 11 compares the funding sources used to pay for infrastructure for industrial aviation development by the Florida airports and the 43 airports in other states. The most striking differences occur in four categories, which are highlighted in yellow in the table:
26 â¢ AIP (55.5% in Florida to 34.9% in other states) â¢ State aviation grants (77.8% to 30.2%) â¢ State economic development grants (66.7% to 32.6%) â¢ Local government grants (11.15% to 2.4%). In addition, the Florida airports used loans from the airport sponsor (33.3%), whereas none of the 43 non-Florida airports reported using this funding source. This may reflect relationships associated with governance. Desirability and Effectiveness of Funding Methods Desirability An evaluation of funding methods in Florida and in the other states (on a 5-point scale, with 5 as most desirable), shows that state aviation grants are a favored funding source in Florida (Table 12) and in other states as well (Table 13). Both groups give high desirability ratings to AIP, direct private investment, state economic development grants, ground leases, and public- private partnerships. TABLE 12 MOST DESIRED FUNDING METHODS IN FLORIDA (SCORES â¥ 4) Airport Improvement Program (AIP) 5 Direct private investment 5 State aviation grants 5 State economic development grants 5 Foreign Trade Zone (FTZ) 4.5 Ground lease 4.5 State grants for public infrastructure 4.5 Agricultural lease 4 Airport privatization (partial or full) 4 Developer funded by directed cash and bank loan as lease condition 4 Mineral or petroleum royalties 4 Public-private partnership (PPP, P3) 4 State infrastructure bank loans 4 Source: Kenville and Smith data (2016). TABLE 13 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).
27 Comparison of the desirability ratings by the 10 Florida airports (Table 12) with the funding methods they reported hav- ing used showed that the airports generally (50% to 70%) used the methods they rated most desirable. This includes state aviation grants, state economic development grants, and AIP. The only exception was the use of airport capital funds/equity, which 70% used but no airport rated as desirable or highly desirable. The same comparison among the 43 non-Florida airports (Table 13) gives somewhat different results. Like Florida airports, the other airports rate using airport capital funds/equity as undesirable yet use it as the most frequent funding source for infrastructure for industrial aviation development. The rest of the most common funding methods (used by 25% to 45% of the 43 airports) are drawn from the methods rated as desirable: direct private investment, ground leases, AIP, state economic development grants, and state grants for public infrastructure. State aviation grants do not appear in the desirable ratings for the 43 airports and were used by only 13 airports (30%). This is perhaps a reflection of the perceived availability of state aviation grants in states other than Florida. Effectiveness An evaluation of how the airports view the effectiveness of the various funding methods shows the methods rated most effec- tive by the Florida airports (Table 14) and by airports in the other states (Table 15). Again, the data show that state aviation grants are high on Floridaâs list compared with the other statesâ lists. TABLE 14 MOST EFFECTIVE FUNDING METHODS IN FLORIDA (SCORES â¥ 4) Direct private investment 5 State economic development grants 5 State aviation grants 5 State grants for public infrastructure 4.5 Airport Improvement Program (AIP) 4.5 Airport capital funds/equity 4.5 State infrastructure bank loans 4.5 Ground lease 4 Developer funded by directed cash and bank loan as lease condition 4 Airport revenue bonds 4 Economic development bonds 4 Foreign Trade Zone (FTZ) 4 Special facility bonds 4 Mineral or petroleum royalties 4 State loans 4 Bank loan to airport 4 Airport privatization (partial or full) 4 Source: Kenville and Smith data (2016). TABLE 15 MOST EFFECTIVE FUNDING METHODS IN OTHER STATES (SCORES â¥ 4) Direct private investment 4.5 Ground lease 4.5 State economic development grants 4 State grants for public infrastructure 4 Airport Improvement Program (AIP) 4 Airport capital funds/equity 4 Airport revenue bonds 4 Public-private partnership (PPP, P3) 4 Source: Kenville and Smith data (2016).
28 Florida airports clearly favor the same methods they said they liked. Of the five top-rated funding methods, three are used most often: state aviation grants (seven airports, 70%), state economic development grants (six airports, 60%), and AIP (five airports, 50%). Direct private investment was used, but airport capital funds/equity was avoided. The picture for the 43 non- Florida airports is very different. The most common funding mechanism was airport capital funds/equity (24 airports, 56%) followed by direct private investment (18 airports, 42%), ground leases (18 airports, 42%), AIP (14 airports, 33%), state grants for public infrastructure (10 airports, 23%), and EDA grants (10 airports, 23%). Another way of looking at the differences in desirability and effectiveness is to look at the differential in scores. For desirability, Florida airports significantly favored state loans, state aviation grants, FTZs, mineral or petroleum royalties, agricultural leases, and state infrastructure bank loans (where âsignificantlyâ means a score differential of at least 1.5 on a 5-point scale). Privatization is excluded from this list, as only one airport is actively pursuing it, with the outcome far from certain. On the other hand, the 43 airports in other states significantly favored special tax districts, local income tax revenue (CEDIT), and local improvement districts (LIDs). For effectiveness (again using the 1.5 differential on a 5-point scale), Florida airports found state infrastructure bank loans, state aviation grants, state loans, FTZs, and mineral or petroleum royalties to be significantly more effective. The 43 airports in other states did not rate any funding method significantly more effective. All other funding mechanismsâincluding AIP and PFCsâwere rated similarly by the two groups of states for desirability and effectiveness. Defining Effectiveness There were no major differences in how the airports defined âeffectivenessâ of funding methods. The largest number of responses was a variation on timeliness of funding and quality of outcomes. The focus is on results-oriented development. A number of responses focused on the level of effort required to obtain funding and the relative lack of restrictions. One Florida response focused on the importance of using funding methods that foster teamwork among the FAA, FDOT, the state eco- nomic development agencies (Florida Department of Economic Opportunity, Enterprise Florida, and the Florida Economic Development Council), the county, and the city. The actual definitions given by the airports are listed in Appendix B. Sources Rejected Because of Unacceptable Restrictions or Conditions Most airports reported that they did not reject any funding sources because of unacceptable restrictions or conditions. The slightly lower percentage in Florida is perhaps an artifact of the small sample size. Combining Funding Sources Only one Florida airport reported major issues with combining funding sources, and it was the one in the Airport Privatization Pilot Program, which is uncharted territory for funding eligibility determinations and conditions. Airports outside Florida reported mixed experiences, with many having successfully combined funding sources but many finding it difficult because of complex differences in requirements. Combining AIP Funds with Other Funds The Florida experience of combining AIP funds with other funding types when industrial aviation development is involved is typified by this quote from a survey respondent: âFor the FAA AIP projects we did our homework, we made sure the FAA was aware of our needs and the size of the MRO facility we had. We went to the ADO office in Orlando as a team and presented our needs to them in person. They were only very positive about helping, never negative.â This approachâusing teamwork and preparationâis facilitated by the CFASPP and the FASP and appears to account for the large difference (55.5% to 34.9%) in how many Florida airports were able to use AIP funds for industrial aviation infra- structure compared with airports in other states. Governance Changes Regarding governance changes, there was virtually no difference (11.1% in Florida, 11.6% in the other states).
29 Land Swaps Regarding land swaps, there was virtually no difference (11.1% in Florida, 9.3% in the other states). Attempts to Cross-Qualify Eligibility In both Florida and the other states, about 20% of the airports in a multi-airport system reported having tried to cross-qualify eligibility for AIP funding from one airport to another in the same system. Through-the-Fence Agreements TTF agreements appear to be somewhat more prevalent in Florida industrial aviation developments (33.3% yes) than in other states (25.6%). However, these data need to be checked against the FAAâs list of TTF agreements. Updated Airport Layout Plan Required There appears to be a difference in how often Florida airports have updated ALPs or prepared new ones compared with the 43 airports in the other states (Table 16). The Florida Aviation and Spaceports Office (similarly to the FAA ADO) requires airports to maintain up-to-date ALPs and master plans matched to their current and planned roles and development (T. Cox, interview, Aug. 29, 2016). For an industrial aviation project or supporting infrastructure to be eligible for state or federal fund- ing, the project must be depicted on the airportâs ALP (J. Halley, interview, Sept. 22, 2016). TABLE 16 AIRPORT LAYOUT PLAN (ALP) AS CONSEQUENCE OF PROPOSED INDUSTRIAL AVIATION DEVELOPMENT Florida (%) Other States (%) New or updated ALP 77.8 48.8 No new or updated ALP 11.1 34.9 Donât know 11.1 16.3 Source: Kenville and Smith data (2016). Table 16 appears to show that developing a new ALP or updating a current one helps. It may be that Floridaâs requirements and the collaborative benefits of the CFASPP help airports, especially smaller airports. Any airport seeking FAA funding for development is required to have an ALP that shows the development. Restrictive Grant Assurances There is a clear difference between the Florida airports and airports in the other states when it comes to the influence of restrictive grant assurances as a factor in funding approaches and outcomes. Nearly twice as many non-Florida airports (41.9%) reported being influenced than did Florida airports (22.2%). The Florida Aviation and Spaceports Office suggested that this is because that office works closely with the FAA ADO and the airports to design projects that will satisfy federal and state grant assurances (A. Keith, interview, Aug. 29, 2016). This approach is reflected in the open-ended comments by Florida airports in the survey: the airports make grant assurances part of the framework for the deal from the start, modify plans to meet FAA and state requirements, and keep development partners informed of the requirements. Floridaâs state grant assurances are very similar to the FAAâs, which facilitates the airportsâ efforts to comply. Encouraging Industrial Aviation Start-Ups Slightly more Florida airports than airports in other states (33.3% to 20.9%) report having programs to encourage industrial aviation start-ups. Most Recent Major Industrial Aviation Project Seven Florida airports (77.8%) reported having recent major industrial aviation projects, compared with 16 airports (37.2%) in other states. This difference probably reflects the criteria that caused the Florida Office of Aviation and Spaceports Office to recommend the original 12 airports: they are actively seeking to expand their industrial aviation activities. This may also
30 account for a small difference in how many projects have timelines of less than 3 years: 57% in Florida and 46.7% in the other states. Florida airports reported starting more projects more recently: 57.2% in 2014 or later, compared with 20.1% in the other states. Seventy-one percent of the Florida airports reported having used an aviation-based consultant for industrial aviation development, whereas only a third of the 43 airports in other states used a consultant. This may be linked to the FASP and the CFASPP, both of which foster and leverage continuous planning, two-way communication, project coordination, updating master plans, and updating ALPs. The airportsâ estimates of whether their most recent projects were successful look different if only âyesâ answers are included (42.9% for Florida to 60.0% for other states). However, if âyesâ and âso far, so good but too soon for final answerâ are combined, the opinions converge (100% for Florida to 86.7% for other states). This ties closely to the previously mentioned seven Florida airports (77.8%) that reported major industrial aviation projects as being ârecent,â as many of those projects might still be under development and construction or have just recently been completed. No Florida airport said its project was unsuccessful. The airports in Florida and those in other states had strong agreement when they ranked the factors that define the âsuc- cessâ of an industrial aviation project. There was absolute agreement on the two most important factors: jobs added and goals and objectives achieved. For Florida, the next three factorsâenhanced visibility for the airport, enhanced reputation of the airport, and increased revenueâwere tightly grouped. For the other states, increased revenue was in a close third place after goals and objectives achieved. Reputation and visibility of the airport followed. In other words, both groups included the same five factors in their top five. Given the caveats about the size of Floridaâs state grants for airports, it is notable that improved priority ranked low (eighth out of nine factors) for airports in Florida and in the other states. Both groupsâthe Florida airports and the 43 airports in other statesâwould embark on a similar project in the future, but two of the non-Florida airports said it is too soon to know. Lessons Learned and Other Advice The following lessons learned are taken directly from the Florida airportsâ survey responses: â¢ Satisfy all state and federal grant assurances. â¢ Approach industrial aviation development as a team. â¢ Use a multidisciplinary team: airport, consultant, airport attorney, airport facility planners, including federal and state planners. â¢ Examine your current business mix, especially the types of planes using your airport, to see what services they may need. â¢ Keep the focus on project goals, especially on job creation. â¢ Make agreements as specific as possibleâambiguity leads to longer project times. â¢ Optimize use of existing infrastructure. Potential tenants want to move quickly, so infrastructure needs to be in place. â¢ The biggest problem is determining fair market value or rent for the property. â¢ Develop a funding package that will be acceptable to the new tenant but that the airport can live with; this is especially important if incentives are involved. â¢ Negotiate win-win but never win-lose. â¢ Manage everyoneâs expectations, which can be a difficult process. â¢ Sell the benefits of the project to the community and to elected officials. Local community support is imperative. â¢ Manage fair market value computations to stay within guidelines. â¢ Manage costs rigorously. â¢ Keep the design process as simple as possible. â¢ Present project parameters in terms that conform to FAA and state standards. â¢ You can never start soon enough. â¢ You can never move fast enough. â¢ Be prepared for the unexpected. Estimates or Firm Data on Economic Impacts Both groups of airports share the same top four economic impacts for which they have estimates: direct employment impacts, indi- rect employment impacts, direct economic impacts, and indirect economic impacts. Florida differs by having a substantial percent-
31 age of airports that track the employment and economic benefits of industrial aviation at each airportâthis is a priority in the state aviation planning process. On the other hand, Florida airports reported fewer estimates of tax impacts of the airports overall and of industrial aviation development. Neither group estimated direct or indirect local tax revenues from industrial aviation. Florida Airports Versus Airports in Block Grant States The apparent strong impact of collaborative long-range planning on the success of Florida airports using AIP funding for industrial aviation development is similar to the results in AIP block grant states that have stringent FAA requirements for planning and prioritization (http://www.faa.gov/airports/aip/state_block). Ten states with surveyed airports are in the block grant programâGeorgia, Illinois, Michigan, Missouri, New Hampshire, North Carolina, Pennsylvania, Tennessee, Texas, and Wisconsinâand only nonprimary commercial service airports, reliever airports, and general aviation airports are included. Only three of the statesâMichigan, New Hampshire, and Texasâare represented in the survey, with five airports. Although the small sample of block grant airports limits the ability to generalize, a comparison of the block grant state airport results with the results from Florida indicates considerable similarity. For example, 60% of the block grant state airports reported using AIP funds for industrial aviation development, compared with 56% of Florida airports. However, considerably more Florida airports (78%) than block grant state airports (40%) use state aviation grants. Reported use of state economic development grants in Florida is similar to their use in block grant states (67% to 60%). The implication is that coordinated statewide planning enhances the possibility of approval for using AIP funds for industrial aviation development. The data also suggest that Floridaâs very well-funded state aviation grants program has a significant effect on promoting collaborative long-range planning. (Note that the Florida figures include all NPIAS cat- egories, not just the three categories eligible in the state block grant programs.) SUMMARY The biggest difference between the Florida airports and those in other states is the much higher use of AIP grants, state aviation grants, and state economic development grants in Florida. This appears to result from the greater amount of state transportation funding in Florida and from the strongly collaborative planning approach taken by the state, the airports, and the FAA ADO. It also appears to result from long-standing personal relationships that have been formed between the state and the FAA. This collaboration may be facilitated by Floridaâs unique situation of having one ADO that serves all the airports in the state and is not shared by neighboring states. Floridaâs approach appears to result in funding outcomes that converge with those in FAA block grant states. These results may also reflect a strong state role in collaborative planning.