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Generating Revenue from Commercial Development On or Adjacent to Airports (2017)

Chapter: Chapter 4 - Self-Assessment Toolkit

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Suggested Citation:"Chapter 4 - Self-Assessment Toolkit." National Academies of Sciences, Engineering, and Medicine. 2017. Generating Revenue from Commercial Development On or Adjacent to Airports. Washington, DC: The National Academies Press. doi: 10.17226/24863.
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Suggested Citation:"Chapter 4 - Self-Assessment Toolkit." National Academies of Sciences, Engineering, and Medicine. 2017. Generating Revenue from Commercial Development On or Adjacent to Airports. Washington, DC: The National Academies Press. doi: 10.17226/24863.
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Suggested Citation:"Chapter 4 - Self-Assessment Toolkit." National Academies of Sciences, Engineering, and Medicine. 2017. Generating Revenue from Commercial Development On or Adjacent to Airports. Washington, DC: The National Academies Press. doi: 10.17226/24863.
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Suggested Citation:"Chapter 4 - Self-Assessment Toolkit." National Academies of Sciences, Engineering, and Medicine. 2017. Generating Revenue from Commercial Development On or Adjacent to Airports. Washington, DC: The National Academies Press. doi: 10.17226/24863.
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Suggested Citation:"Chapter 4 - Self-Assessment Toolkit." National Academies of Sciences, Engineering, and Medicine. 2017. Generating Revenue from Commercial Development On or Adjacent to Airports. Washington, DC: The National Academies Press. doi: 10.17226/24863.
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Suggested Citation:"Chapter 4 - Self-Assessment Toolkit." National Academies of Sciences, Engineering, and Medicine. 2017. Generating Revenue from Commercial Development On or Adjacent to Airports. Washington, DC: The National Academies Press. doi: 10.17226/24863.
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Suggested Citation:"Chapter 4 - Self-Assessment Toolkit." National Academies of Sciences, Engineering, and Medicine. 2017. Generating Revenue from Commercial Development On or Adjacent to Airports. Washington, DC: The National Academies Press. doi: 10.17226/24863.
×
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Suggested Citation:"Chapter 4 - Self-Assessment Toolkit." National Academies of Sciences, Engineering, and Medicine. 2017. Generating Revenue from Commercial Development On or Adjacent to Airports. Washington, DC: The National Academies Press. doi: 10.17226/24863.
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Suggested Citation:"Chapter 4 - Self-Assessment Toolkit." National Academies of Sciences, Engineering, and Medicine. 2017. Generating Revenue from Commercial Development On or Adjacent to Airports. Washington, DC: The National Academies Press. doi: 10.17226/24863.
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Suggested Citation:"Chapter 4 - Self-Assessment Toolkit." National Academies of Sciences, Engineering, and Medicine. 2017. Generating Revenue from Commercial Development On or Adjacent to Airports. Washington, DC: The National Academies Press. doi: 10.17226/24863.
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Suggested Citation:"Chapter 4 - Self-Assessment Toolkit." National Academies of Sciences, Engineering, and Medicine. 2017. Generating Revenue from Commercial Development On or Adjacent to Airports. Washington, DC: The National Academies Press. doi: 10.17226/24863.
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Suggested Citation:"Chapter 4 - Self-Assessment Toolkit." National Academies of Sciences, Engineering, and Medicine. 2017. Generating Revenue from Commercial Development On or Adjacent to Airports. Washington, DC: The National Academies Press. doi: 10.17226/24863.
×
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Suggested Citation:"Chapter 4 - Self-Assessment Toolkit." National Academies of Sciences, Engineering, and Medicine. 2017. Generating Revenue from Commercial Development On or Adjacent to Airports. Washington, DC: The National Academies Press. doi: 10.17226/24863.
×
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Suggested Citation:"Chapter 4 - Self-Assessment Toolkit." National Academies of Sciences, Engineering, and Medicine. 2017. Generating Revenue from Commercial Development On or Adjacent to Airports. Washington, DC: The National Academies Press. doi: 10.17226/24863.
×
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Suggested Citation:"Chapter 4 - Self-Assessment Toolkit." National Academies of Sciences, Engineering, and Medicine. 2017. Generating Revenue from Commercial Development On or Adjacent to Airports. Washington, DC: The National Academies Press. doi: 10.17226/24863.
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Suggested Citation:"Chapter 4 - Self-Assessment Toolkit." National Academies of Sciences, Engineering, and Medicine. 2017. Generating Revenue from Commercial Development On or Adjacent to Airports. Washington, DC: The National Academies Press. doi: 10.17226/24863.
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Suggested Citation:"Chapter 4 - Self-Assessment Toolkit." National Academies of Sciences, Engineering, and Medicine. 2017. Generating Revenue from Commercial Development On or Adjacent to Airports. Washington, DC: The National Academies Press. doi: 10.17226/24863.
×
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Suggested Citation:"Chapter 4 - Self-Assessment Toolkit." National Academies of Sciences, Engineering, and Medicine. 2017. Generating Revenue from Commercial Development On or Adjacent to Airports. Washington, DC: The National Academies Press. doi: 10.17226/24863.
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Suggested Citation:"Chapter 4 - Self-Assessment Toolkit." National Academies of Sciences, Engineering, and Medicine. 2017. Generating Revenue from Commercial Development On or Adjacent to Airports. Washington, DC: The National Academies Press. doi: 10.17226/24863.
×
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Suggested Citation:"Chapter 4 - Self-Assessment Toolkit." National Academies of Sciences, Engineering, and Medicine. 2017. Generating Revenue from Commercial Development On or Adjacent to Airports. Washington, DC: The National Academies Press. doi: 10.17226/24863.
×
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Suggested Citation:"Chapter 4 - Self-Assessment Toolkit." National Academies of Sciences, Engineering, and Medicine. 2017. Generating Revenue from Commercial Development On or Adjacent to Airports. Washington, DC: The National Academies Press. doi: 10.17226/24863.
×
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Suggested Citation:"Chapter 4 - Self-Assessment Toolkit." National Academies of Sciences, Engineering, and Medicine. 2017. Generating Revenue from Commercial Development On or Adjacent to Airports. Washington, DC: The National Academies Press. doi: 10.17226/24863.
×
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Suggested Citation:"Chapter 4 - Self-Assessment Toolkit." National Academies of Sciences, Engineering, and Medicine. 2017. Generating Revenue from Commercial Development On or Adjacent to Airports. Washington, DC: The National Academies Press. doi: 10.17226/24863.
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Suggested Citation:"Chapter 4 - Self-Assessment Toolkit." National Academies of Sciences, Engineering, and Medicine. 2017. Generating Revenue from Commercial Development On or Adjacent to Airports. Washington, DC: The National Academies Press. doi: 10.17226/24863.
×
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Suggested Citation:"Chapter 4 - Self-Assessment Toolkit." National Academies of Sciences, Engineering, and Medicine. 2017. Generating Revenue from Commercial Development On or Adjacent to Airports. Washington, DC: The National Academies Press. doi: 10.17226/24863.
×
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Suggested Citation:"Chapter 4 - Self-Assessment Toolkit." National Academies of Sciences, Engineering, and Medicine. 2017. Generating Revenue from Commercial Development On or Adjacent to Airports. Washington, DC: The National Academies Press. doi: 10.17226/24863.
×
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Suggested Citation:"Chapter 4 - Self-Assessment Toolkit." National Academies of Sciences, Engineering, and Medicine. 2017. Generating Revenue from Commercial Development On or Adjacent to Airports. Washington, DC: The National Academies Press. doi: 10.17226/24863.
×
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Suggested Citation:"Chapter 4 - Self-Assessment Toolkit." National Academies of Sciences, Engineering, and Medicine. 2017. Generating Revenue from Commercial Development On or Adjacent to Airports. Washington, DC: The National Academies Press. doi: 10.17226/24863.
×
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Suggested Citation:"Chapter 4 - Self-Assessment Toolkit." National Academies of Sciences, Engineering, and Medicine. 2017. Generating Revenue from Commercial Development On or Adjacent to Airports. Washington, DC: The National Academies Press. doi: 10.17226/24863.
×
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Suggested Citation:"Chapter 4 - Self-Assessment Toolkit." National Academies of Sciences, Engineering, and Medicine. 2017. Generating Revenue from Commercial Development On or Adjacent to Airports. Washington, DC: The National Academies Press. doi: 10.17226/24863.
×
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Suggested Citation:"Chapter 4 - Self-Assessment Toolkit." National Academies of Sciences, Engineering, and Medicine. 2017. Generating Revenue from Commercial Development On or Adjacent to Airports. Washington, DC: The National Academies Press. doi: 10.17226/24863.
×
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Suggested Citation:"Chapter 4 - Self-Assessment Toolkit." National Academies of Sciences, Engineering, and Medicine. 2017. Generating Revenue from Commercial Development On or Adjacent to Airports. Washington, DC: The National Academies Press. doi: 10.17226/24863.
×
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Suggested Citation:"Chapter 4 - Self-Assessment Toolkit." National Academies of Sciences, Engineering, and Medicine. 2017. Generating Revenue from Commercial Development On or Adjacent to Airports. Washington, DC: The National Academies Press. doi: 10.17226/24863.
×
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Suggested Citation:"Chapter 4 - Self-Assessment Toolkit." National Academies of Sciences, Engineering, and Medicine. 2017. Generating Revenue from Commercial Development On or Adjacent to Airports. Washington, DC: The National Academies Press. doi: 10.17226/24863.
×
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Suggested Citation:"Chapter 4 - Self-Assessment Toolkit." National Academies of Sciences, Engineering, and Medicine. 2017. Generating Revenue from Commercial Development On or Adjacent to Airports. Washington, DC: The National Academies Press. doi: 10.17226/24863.
×
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Suggested Citation:"Chapter 4 - Self-Assessment Toolkit." National Academies of Sciences, Engineering, and Medicine. 2017. Generating Revenue from Commercial Development On or Adjacent to Airports. Washington, DC: The National Academies Press. doi: 10.17226/24863.
×
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Suggested Citation:"Chapter 4 - Self-Assessment Toolkit." National Academies of Sciences, Engineering, and Medicine. 2017. Generating Revenue from Commercial Development On or Adjacent to Airports. Washington, DC: The National Academies Press. doi: 10.17226/24863.
×
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Suggested Citation:"Chapter 4 - Self-Assessment Toolkit." National Academies of Sciences, Engineering, and Medicine. 2017. Generating Revenue from Commercial Development On or Adjacent to Airports. Washington, DC: The National Academies Press. doi: 10.17226/24863.
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53 C h a p t e r 4 Self-Assessment Toolkit 4.1 Introduction This Self-Assessment Toolkit provides the reader with information and then asks questions relating to: Airport ownership Management structure Business activity Planning The answers to the questions in this toolkit generate a self-assessment that will later be used to guide an evaluation of development options. The text and checklist sections are presented in an alternating sequence so that questions about a topic immediately follow the explanation. Each checklist section includes the following icon as a reminder that all 12 checklists are available in the guidebook appendix: The 12 checklists are: Airport Ownership Management Structure Federal Aviation Administration (FAA) Grant Obligations Airport Layout Plans (ALPs) and Airport Master Plans Airport Strategic Business Plan/Budgeting Airport Business Segments Dominant Industry or Company Business Trends and Projections for Airport Revenue Funds for Development Risk Tolerance for Development Projects Development Goals Community Context Chapter 4 concludes with a section on goal setting that is intended to encourage the airport to take a closer look at its motivations for pursuing commercial development.

54 Generating revenue from Commercial Development On or adjacent to airports 4.2 Airport Ownership KNOW Airport ownership can be private or public, but several variations exist in both sectors regarding the form of ownership. Public airports can be owned by a: State County Municipality Independent authority Privately owned airports can be held by: Corporations Partnerships Families Individuals Why is ownership significant? The type of ownership can affect the airport’s ability to make decisions regarding land disposition and make investments for site preparation and infrastructure. It also can define the extent of legal constraints or public involvement required for such decisions. Ownership structure also can affect how nimble the organization can be in decision-making or responding to market opportunities. An individually owned airport without a complicated reporting hierarchy can make a quicker decision than an airport with a more complex management structure, where decisions may be subject to board approval, public administration and budgeting approval, or public hearings. Publicly owned airports often deal with restrictions on raising funds and requirements for public bidding for master developers, professional services, or public-private partnerships. Such airports can be subject to departmental budget restrictions or limitations on bonding for improvements. They also can be affected by political currents with respect to support for airport development— one reason for the importance of good community relations, and why good community relations are stressed throughout this guidebook. Publicly owned airports with many of these limitations may want to consider how they can encourage off-airport development as a revenue enhancement strategy, either in place of or in addition to development by the airport, as discussed in Chapter 7 of this guidebook. Privately owned airports may not encounter as many restrictions, but they may have other limits on raising capital for development or infrastructure. New investors or partners may be necessary. Privately owned airports also may be subject to varying levels of community support, depending on how the airport is perceived.

Self-assessment toolkit 55 HAVE The questions in this section can be used to identify the airport’s ownership structure. The complete Airport Ownership Checklist is provided in Appendix A, “Chapter 4 Checklists,” and a customizable copy of the same checklist can be downloaded from the ACRP Research Report 176 webpage. PRIVATE? • Individual? Airports owned by individuals may have the simplest structure and decision-making process. Additional investors may be needed for development projects. • Family? Family-owned businesses may have more complexity than individual ownership, but still have a simple structure for decision-making and action. • Corporation or partnership? With corporate or partnership structures, decisions can become more complex, given the involvement of board members or multiple partners. More debate may occur about strategy and action. PUBLIC? • City or county? The airport may be its own department or it may be part of a department of transportation (DOT), department of public works, or economic development department, and it is usually subject to annual budget appropriations. • Independent airport authority? These entities usually represent the combined effort of several municipalities who agree to run the airport through an independent authority. Each municipality is represented in the leadership through elections or appointment to a managing board. Independent airport authorities generally have more independence than municipal or state-owned airports, and they may have bonding authority. • Port authority? A governmental or intergovernmental body that manages a defined set of bridges, tunnels, airports, and other such facilities of a port or city. • State? Responsibility for state-owned airports can be assigned to an aeronautics division within the state DOT or may be the responsibility of an aeronautics commission. In either case, the airport can be subject to budget appropriations and political changes. In this scenario, funding may be available through economic development agencies. Airport ownership options Check to select Notes Private? Individual? Family? Corporation or partnership? Public? City or county? Independent airport authority? Port authority? State?

56 Generating revenue from Commercial Development On or adjacent to airports DO Use the information identified in this section to consider benefits and limitations of the airport’s ownership structure and access to financial resources as it relates to on-airport development initiatives. Although it will not be possible at this point to answer specific questions about the airport’s ability to make decisions or access financial capital, these characteristics will be important references through the toolkits as a development plan and costs are better defined.

Self-assessment toolkit 57 SOUND BITE The property development department is understaffed, which adds to the challenges of attracting development. 4.3 Management Structure/Report/Decision-Making KNOW This set of checklist items looks for more in-depth information, building on the ownership question above. The answers to the questions in this section of the toolkit should clarify how decisions regarding the planning and implementation process will be made, who will have primary responsibility for executing the process, and whether a system of reporting and review is in place. Another important element to analyze is whether an employee position exists or should be established to devote time to the development process. The need for a dedicated employee position can depend on whether the development is likely to be short term or long term, and whether the development project will be fairly simple or extensive. Devoting only part-time attention to development and marketing may not work. For example, in one case study examined, airport land was open for development but even though website information could be found, no staff appeared to have been assigned responsibility for being knowledgeable about what was available or providing information to potentially interested parties. HAVE Completion of this section of the toolkit will clarify the airport’s procedure going forward, should the airport sponsor elect to continue with the development process. It is easier to estimate time frames for planning and development if the channels of reporting and decision-making are known up front and if the airport sponsor assigns responsibilities for managing the project to current staff or creates the appropriate staff positions. The complete Management Structure Checklist is provided in Appendix A, “Chapter 4 Checklists,” and a customizable copy of the same checklist can be downloaded from the ACRP Research Report 176 webpage. WHO SETS AIRPORT POLICY? Executive director, board, commissioner? HOW IS IT IMPLEMENTED? Which managers have the responsibility to take action? Is the structure tied to excessive hierarchy? How far up the reporting or structural chain will decisions go? WHO CREATES AND WHO APPROVES THE AIRPORT BUDGET? Executive director? Annual budget legislation? Will decisions depend on budget cycles? WHERE DOES APPROVAL AUTHORITY LIE FOR A DECISION TO ENGAGE IN DEVELOPMENT, SIGN A DEAL, OR ISSUE BONDS? Board, mayor, commissioner, executive director, airport manager, deputy or vice president? HOW MANY EMPLOYEES ARE IN EACH DEPARTMENT? DOES A PROPERTY/DEVELOPMENT MANAGER POSITION EXIST? Would this manager oversee a development project or engage consultants? Will the airport manager or designated employee have a degree of decision-making autonomy that will keep the process moving? DOES ENABLING AND GOVERNING LEGISLATION APPLY? If the airport is a public entity or authority, do any laws or regulations limit the airport’s activities? Do any restrictions in governing statutes limit development options? Do institutional or legal restrictions limit financing or funding abilities? In this guidebook, Chapter 3, “Legal Considerations,” may

58 Generating revenue from Commercial Development On or adjacent to airports provide some guidance, but other state legislation may also apply. In some states, for example, public-private partnerships may not be permitted and thus should be investigated on a case-by-case basis. ARE THERE BOND RESOLUTIONS/RESTRICTIONS? These documents define the rights and responsibilities of issuers and bondholders, and how bond funds should be used. Does this apply to the airport? ARE THERE RATE COVENANTS? These documents may specify increases in user fees as necessary to cover debt service, and recourse by bondholders if the issuer, such as an airport authority, defaults. The implications for airport development warrant both a review of available funds for debt service and separate resources to devote to development. DO The results of this management structure inventory can be used to consider who at the airport will make policy decisions and who will implement development initiatives. Staffing changes or additions may be needed to manage the development. It is also important to consider the airport’s current position as a developer with respect to enabling legislation and existing financial agreements and restrictions. Airport management structure Notes Who sets airport policy? How is policy implemented? Who creates the airport budget? Who approves the budget? Where does authority lie? To engage in development? To sign a deal? To issue bonds? How many employees per department? Property/development manager? Enabling/governing legislation? Bond resolution/restrictions? Rate covenants?

Self-assessment toolkit 59 4.4 FAA Grant Obligations KNOW Airports in the National Plan of Integrated Airport Systems (NPIAS) are eligible to receive grants under the FAA Airport Improvement Program (AIP). If accepted, these grants carry obligations or assurances as a condition of receiving funds. There are 39 grant assurances applicable to airport sponsors receiving or having received FAA grant assistance. FAA’s Airport Compliance Manual (FAA Order 5190.6B) presents all compliance requirements in detail. The grant assurances most applicable to development are discussed in this guidebook in Chapter 3, “Legal Considerations.” FAA grant assurances can control many critical aspects of airport development, including: Maintaining compatible land uses in the airport vicinity Rates for land leases and sales, to reflect fair market value Limitations on use of airport revenue for airport purposes FAA approval of non-aeronautical land uses FAA approval of land sales through a land release If the airport is grant obligated, the airport sponsor must refer to the grant assurances when considering development alternatives. The airport’s initial development concept may have to be adjusted after review to be compliant with applicable assurances, as they will affect many elements of development planning and implementation. Case studies repeatedly revealed that the time required for a land release from FAA was longer than anticipated. Ideally, any release of land for non-aeronautical use from FAA control should be done before marketing the property for lease or sale, as the time required can increase development costs and deter development interest. In addition to Chapter 3 of this guidebook and the FAA Airport Compliance Manual, information sources include ACRP Legal Research Digest 23: A Guide for Compliance with Grant Agreement Obligations to Provide Reasonable Access to an AIP-Funded Public Use General Aviation Airport (February 2015). An additional ACRP resource is currently under development as part of ACRP Project 03-38, “Understanding FAA Grant Assurance Obligations.” For airports subject to grant obligations, communication with FAA will be necessary early and throughout the process. HAVE The answers to the questions in this section of the toolkit clarify whether federal grant obligations are in place on property being considered for development. If the airport is considering selling the property outright or leasing it for non-aeronautical use, the property will need to be “released” by FAA. The complete FAA Grant Obligations Checklist is provided in Appendix A, “Chapter 4 Checklists,” and a customizable copy of the same checklist can be downloaded from the ACRP Research Report 176 webpage. IS THE AIRPORT GRANT OBLIGATED? If the airport has received federal or state grants for airport improvements, the answer is, most likely, “Yes.” Independently funded private airports may not be obligated.

60 Generating revenue from Commercial Development On or adjacent to airports Non-aeronautical land Yes No Notes Identified as such on ALP? Released by FAA? Acquired for noise mitigation? ALP-required FAA environmental review? Grant obligations Yes No Notes Airport? Received federal funds? Received state grants? Land for development? Aeronautical use on ALP? Owned by airport? Acquired with airport funds? IS THE LAND IDENTIFIED FOR DEVELOPMENT GRANT OBLIGATED? Land designated for aeronautical use on the ALP would be affected by the grant obligations. Other parcels of land owned by the airport may have been acquired with airport funds, however, and may not be affected. The “five tiers” concept presented in Chapter 2 of this guidebook can help to explain this issue. IS NON-AERONAUTICAL LAND SHOWN AS SUCH ON THE ALP? The answer to this question depends on the status of planning. Sites being considered for non-aeronautical development should be shown on the ALP as “future non-aeronautical” already, or the ALP should be updated. WAS THE LAND ACQUIRED FOR NOISE MITIGATION? If the answer to this question is “yes,” potential uses of the land may be subject to specific compliance requirements. This issue applies to only those airports that have completed a Part 150 Airport Noise Compatibility Planning Study. HAS NON-AERONAUTICAL LAND BEEN RELEASED? Has the airport completed the land release process to allow airport property to be sold or leased for non-aeronautical use? It is possible for land to have been designated for future non-aeronautical use on the ALP but not yet released by the FAA. If the land has not yet been released, this step will need to be carried out before any lease or sale arrangements take place. DID THE ALP REQUIRE FAA ENVIRONMENTAL REVIEW? If the ALP has been revised to remove land from aeronautical use, FAA may have exercised a federal requirement for environmental review. If an environmental review was completed and environmental data was collected for this process, that information may be useful in site evaluation and the development process.

Self-assessment toolkit 61 DO The results of this exercise help guidebook users understand how grant obligations currently apply to airport property and how they may impact development choices and timelines. This information could be used to inform later decisions about land uses and other development criteria.

62 Generating revenue from Commercial Development On or adjacent to airports SOUND BITE The airport is currently privately owned and not federally obligated, but the airport will require extensive future federal aid to correct airside infrastructure deficiencies. 4.5 The ALP and the Airport Master Plan KNOW Research and case studies indicate that successful airport management and development is contingent on careful planning. For this reason, planning is encouraged for all airports whether or not it is legally mandated. The more that the airport is able to consider and document options for future development, the better positioned it will be to evaluate strategies, respond to opportunities for development, and demonstrate the capacity to accommodate it. In the case of grant-obligated airports, a level of planning is mandatory. Some state grants have associated planning requirements. FAA Grant Assurance 29 requires maintenance of an updated ALP. An ALP can be an element of the Airport Master Plan or it can be a stand-alone document. The ALP includes drawings and a narrative component, describing: Existing airport property boundaries All existing buildings, infrastructure and other improvements Off-site areas owned or controlled by the airport, including planned additions All proposed future airport facilities All existing and future non-aeronautical areas The narrative accompanying the ALP should include existing and projected aviation activity, the basis for proposed new facilities, environmental conditions, and a capital improvement plan. The ALP and any future adjustments are subject to FAA approval. The ALP should clearly designate aeronautical land and future non-aeronautical land. Some future airport facilities may be proposed as aeronautical uses for revenue generation. For example, hangars or air cargo facilities may be built by the airport and leased to private users. For aeronautical uses—even those planned for revenue generation—designation on the ALP is sufficient. When land is developed for non-aeronautical uses, whether it involves a sale or a lease, an FAA land release is most likely required. Because the process of obtaining an FAA land release can be time consuming, it should be addressed early in the planning process. An ALP is an important planning tool as well as a mandatory grant obligation for federally obligated airports. This planning approach is recommended for all airports—even those that are not grant obligated—as it provides a foundation for an Airport Master Plan. An Airport Master Plan is a detailed narrative and graphic plan that outlines the airport’s planning and development goals and needs on short-term (5-year), medium-term (10-year), and long-term (20-year) horizons. The airport’s planning goals are the result of an analysis of the airport’s capacity and needs. Capacity is explored through projections of future based aircraft, aircraft operations, and, for commercial service airports, passengers. These projections are used to evaluate and plan for: Airport infrastructure Existing facilities and capacities Existing and projected deficiencies

Self-assessment toolkit 63  Facilities needed to meet deficiencies  Evaluation of alternatives  Capital improvement programming  Land uses on- and off-airport A master planning effort usually involves stakeholder input, and is a way to engage the surrounding community and coordinate goals of the airport with local economic development priorities. FAA provides guidance for both Airport Master Plans and ALPs in AC 150/5070-6B, Airport Master Plans. A detailed description of master planning documents also is found in ACRP Report 114: Guidebook for Through-the-Fence Operations. Comprehensive long-range planning is a key to identifying development opportunities and future airport facility needs. Being proactive rather than reactive attracts market interest and sets the stage for orderly development. Whether or not an airport is subject to grant assurances, planning efforts along the lines of an ALP and Airport Master Plan have been demonstrated to be instrumental in successful development efforts. HAVE Determine the current status of the airport’s ALP, Airport Master Plan, and other planning documents and review the information available to inform development decisions. The complete ALP and Master Plan Checklist is provided in Appendix A, “Chapter 4 Checklists,” and a customizable copy of the same checklist can be downloaded from the ACRP Research Report 176 webpage. PLAN TYPES COMPLETED? Are there an ALP and/or Airport Master Plan of record? • Last Updated? When was the ALP updated? Potential airport development areas may have been designated on an Airport Master Plan many years ago, and the ALP will need to be re-examined in detail to reflect present conditions. TOTAL ACREAGE IN PLAN AREA? How many acres are within the airport operations area (AOA)? What is the total acreage owned by the airport? ACREAGES OF AERONAUTICAL AND NON-AERONAUTICAL LAND? Are these acres designated on the plan? Both existing and future? LAND USES DESIGNATED? These designations can be general (e.g., terminals or commercial) or more specific if market sectors have been identified. Interim, non- structural, or lower-value uses also can be shown, such as agriculture or utility uses. Plan types completed Check to select Notes Airport Layout Plan (ALP)? Update needed/planned? Airport Master Plan?

64 Generating revenue from Commercial Development On or adjacent to airports PLANNING YEAR HORIZON? Does the plan include strategies for the short term (5 years), medium term (10 years), and long term (20 years)? Is some development effort slated in each term? IS THE CONTEMPLATED DEVELOPMENT CONSISTENT WITH THE ALP/AIRPORT MASTER PLAN? Has the airport designated areas for aeronautical and non-aeronautical uses on the ALP? Are those areas consistent with the locations that are currently being considered for development? If not, FAA approval of a revised ALP will be necessary. MAPPING OF RUNWAY PROTECTION ZONES, HEIGHT RESTRICTED AREAS, AND OTHER FAA LIMITATIONS? The ALP should show areas subject to limitations for safe airport operations, such as runway protection zones (RPZs), runway and taxiway safety areas, and obstacle and object-free zones. This information will help the airport evaluate whether development areas could be subject to regulatory controls limiting use or building mass. MAPPING OF NOISE COMPATIBILITY (BUFFER) LAND? If the airport has completed a Part 150 Airport Noise Compatibility Planning Study, the airport may have received FAA funding for purchasing land surrounding the airport as a noise buffer. The land should be shown on the ALP and/or the Airport Master Plan. Changes in the use or disposition of such lands are subject to FAA controls and approvals. Development Plan consistency Check to select Notes ALP-designated aeronautical use? ALP-designated non-aeronautical use? Consistent with current development plans? Planning year horizon Check to select Notes Short term (5 years)? Medium term (10 years)? Long term (20 years)? Plan area characteristics Size in acres Existing Future Notes Total acreage in plan area? Aeronautical acreage? Non-aeronautical acreage?

Self-assessment toolkit 65 NOISE CONTOURS? Noise often can be a contentious issue between the airport and the community. Noise contours for the airport may have been developed as part of a study such as an Environmental Assessment (EA) or, less frequently, for a Part 150 Airport Noise Compatibility Planning Study. The noise contours will show noise impacts from aviation activity, including impacts to off-airport property. If available, those studies may identify any areas where sensitive land uses should be avoided due to airport noise levels. SHOWS FUTURE FACILITY IMPROVEMENTS? An Airport Master Plan should show not only existing improvements and structures, but future improvements designed to replace aging facilities or to address projected demand. These designations are important, as commercial development should not be planned for areas that may be needed for future aviation use. Other Notes Transportation network? Is existing documented? Planned future improvements? Plan mapping Check to select Notes Runway protection zones (RPZs)? Runway and taxiway safety areas? Obstacle- and object-free zones? Noise compatibility (buffer) land on ALP? On Airport Master Plan? Noise contours? Future improvements identified? SOUND BITE In addition to air service, the airport is near a major interstate and three U.S. highways, and has rail service adjacent to the property. TRANSPORTATION IMPROVEMENT NEEDS AND PLANS? In the guidebook case studies and literature review, transportation access emerged as a critical issue in the success of airport-related development. The ALP or Airport Master Plan should document the existing transportation network (including surface roads, rail lines, and transit connections), and identify any planned future improvements.

66 Generating revenue from Commercial Development On or adjacent to airports DO The answers from this section of the toolkit can help guidebook users understand the current status of the airport’s ALP or Airport Master Plan and the information that is available through these resources. This evaluation will also help to identify if there is a need to update the planning documents.

Self-assessment toolkit 67 SOUND BITE 4.6 Airport Strategic Business Plan/Budgeting Process KNOW Successful planning for both airport business and real estate development requires a long-term view. Dependence on a short-term view may result in selling random parcels to meet budget gaps, which does not result in a cohesive development or long-term, predictable income. A Strategic Business Plan is an ideal planning tool for long-term financial sustainability. A Strategic Business Plan is a document that sets out the mission and vision for the airport and identifies the economic place the airport wants to occupy in the region, its business direction, and its purpose. The plan articulates quantifiable long-term goals for the airport in terms of metrics such as revenue, passengers, or cargo volume. Those long-term goals provide a framework for shorter-term business objectives that will guide interim decisions and annual budgets as well as the daily actions of the ACRP has published several reference guides to assist airports in preparing strategic business plans, including ACRP Report 77: Guidebook for Developing General Aviation Airport Business Plans and ACRP Report 20: Strategic Planning in the Airport Industry. An up-to-date Strategic Business Plan will be a useful tool in evaluating development feasibility. A Strategic Business Plan involves all sectors of the airport’s operation and provides a comprehensive view of where the airport should be heading. Before embarking on a development project, management should evaluate whether the development would contribute to the airport’s long-term goals. Will it help the airport to be self-sustaining? Will its revenue support new facilities to achieve the next level of aviation growth? Will the development leave enough land for future aviation needs? It is important to remember that an annual budget is not a business plan. This principle was voiced often as a cautionary maxim during the ACRP Project 03-39 interviews. A short-term airport budgeting approach may not be aligned with long-term airport commercial and industrial development goals. Strategic business planning should drive airport investments and have multi- year planning horizons with measurable goals. Long-term projections will reveal strengths and weaknesses, enable an analysis of whether a development effort can be supported, and define the role of development-generated revenue in the financial context of the airport’s Strategic Business Plan. HAVE The answers to the questions in this section of the toolkit help document more about the airport’s current budgeting process, including methods of planning for the middle term and long term. The complete Airport Strategic Business Plan/Budgeting Checklist is provided in Appendix A, “Chapter 4 Checklists,” and a customizable copy of the same checklist can be downloaded from the ACRP Research Report 176 webpage. One self-supporting case study airport had not received funds from the owner city for more than 30 years. Revenue streams included air service leases, supporting operations, and commercial lease property. The airport reported developing an annual budget but did not have any long-term budgeting projections. airport’s management.

68 Generating revenue from Commercial Development On or adjacent to airports STRATEGIC BUSINESS PLAN? Does the airport have a Strategic Business Plan? If not, consider that a Strategic Business Plan is necessary in order to start development planning on a solid foundation. If yes, when was it adopted? If it was not adopted recently, the airport is advised to reexamine the Strategic Business Plan and revise it if necessary to reflect current goals and business direction. Such a review is especially important if the business plan was adopted prior to the 2007–2009 economic recession (the Great Recession). PLANNING HORIZON? Does the Strategic Business Plan have multiple horizons, identifying short-term, mid-term, and long-term goals? BUDGETING HORIZON? Which of the following terms describes the airport’s current budgeting horizon, including future expenses and revenue projections? • Annual? • 5-year? • 10-year? • Longer? ANNUAL OR 5-YEAR CAPITAL IMPROVEMENT PLAN (CIP)? If a CIP is in place, does the CIP implement the Strategic Business Plan’s improvement program? Budgeting horizon Yes No Notes Annual? 5-year? 10-year? Longer? Strategic Business Plan Check to select Notes Strategic Business Plan? Adopted before 2009? Due for review and update? Plan has multiple horizons? Short-term goals? Mid-term goals? Long-term goals?

Self-assessment toolkit 69 MAJOR CAPITAL IMPROVEMENTS PLANNED? What facilities will be improved? Will improvements provide necessary upgrades to existing facilities, or will they provide new levels of service for aviation users? Will there be revenue from development? IS THE AIRPORT SELF-SUSTAINING? Does the revenue generated by airport operations and activities support airport operations? Is this situation sustainable in the middle term and long term, according to the Strategic Business Plan? If not currently, does the plan project that the airport will be self-sustaining in the future? PUBLIC SUBSIDY? For a publicly owned airport, is government funding required to maintain operations? For a privately owned airport, have loans or grants from economic development agencies or other public agencies been obtained? Revenue and sustainability Yes No Notes Revenue supports operations? Revenue sustainable according to mid-term plan? Revenue sustainable according to long-term plan? If not, is airport projected to be self-sustaining in future? Major capital improvements Notes Facilities to be improved? Improvements to existing facilities or new levels of service? Revenue generation? Capital Improvement Plan Yes No Notes Annual? 5-year? Implements the Strategic Business Plan’s improvement program?

70 Generating revenue from Commercial Development On or adjacent to airports Airport income proportions Notes Revenue breakdown by source? How might current proportions change? Current development generating revenue? Public subsidy Yes No Notes Publicly owned? Dependent on government funding to operate? Privately owned? Recipient of public loans or grants? AIRPORT INCOME PROPORTIONS? What is the breakdown of airport revenue from different sources? How does the Strategic Business Plan anticipate the current proportions might change? Does the airport already generate some revenue from on-airport development? D d O If the answers to the checklist questions reveal that short-term budgeting is the norm, or that the airport’s strategic plan is out of date, further business planning should be accomplished before pursuing development. It will be important to define a future vision and goals for the airport and evelop a reasonable path to reach that goal. A Strategic Business Plan will help answer the question of whether development would contribute to the airport’s long-term goals for revenue generation.

Self-assessment toolkit 71 4.7 Identifying Customer Base/Revenue Sources KNOW Identifying the sectors of an airport’s customer base is an important component of a Strategic Business Plan. This exercise can help to define priorities and provide focus for growing airport business revenue. The Strategic Business Plan examines the sources of airport revenue, determines whether they are growing or declining, and defines their relationship to the surrounding economy. The results of the examination provide the basis for decisions in the strategic plan about where to focus airport resources and facility improvements, and can also inform marketing strategies for the proposed development. The composition of an airport’s ongoing customer base can indicate potential users of an adjacent commercial or industrial development and can provide a focus for designing and marketing the future project. HAVE The answers to questions related to the airport’s current customer base and related trends help identify existing conditions and potential development markets. The questions in this section of the toolkit will help guidebook users identify major drivers of airport business activity, including commercial passengers, general aviation operations, and sources of direct lease revenue from existing development. The complete Airport Business Segments Checklist is provided in Appendix A, “Chapter 4 Checklists,” and a customizable copy of the same checklist can be downloaded from the ACRP Research Report 176 webpage. FREIGHT/CARGO? Consider both aircraft operations and rent generated from cargo tenants at the airport. BUSINESS PASSENGERS? Do airport passengers come to or from corporate headquarters, training facilities, or office parks? LEISURE PASSENGERS? Could nearby tourist or cultural destinations draw travelers? MEDICAL? Does a major medical institution use the airport for medical travelers, shipments, or emergencies? MILITARY? Is a military base on or near the airport that accounts for significant activity? EDUCATIONAL? Do nearby schools and universities supply passengers? Is there a flight school on or near the airport? CONCESSIONS? Does the airport currently lease space for concessions or retail services in a terminal or other airport building? LEASES? Are ground leases currently a source of income? THROUGH-THE-FENCE (TTF)? Do existing agreements allow airfield access from any adjacent property? Consider both the revenue generated from this arrangement and the types of business uses. CAPACITY ISSUES? Are any business segments straining the capacity of current facilities? Will improvements be necessary to maintain that line of business? OTHER? Should other airport customers be considered in the planning process? SOUND BITE There is an aviation niche in business and the airport is looking for part of that.

72 Generating revenue from Commercial Development On or adjacent to airports DO Compare the information in the business plan (if available) with the information gathered in the toolkit/checklist to create a comprehensive picture of current airport business segments. Use this information to identify potential commercial and/or industrial uses that may benefit from existing business relationships with the airport and to rule out uses that may struggle. For example, if business passengers are a major and growing component of the airport’s business, hotel and office development may be promising options. If the main business segment is cargo transport, distribution and warehousing are obvious choices. If the airport is in a flourishing second-home or tourist destination, that fact can guide development of on- and off- airport amenities. For example, Opa Locka Airport, in Florida, has developed facilities catering to private jet customers. On the other hand, if a significant business segment has been declining, it may not be a good target audience for additional development. Major business sources/customers Yes No Notes Freight/cargo? Business passengers? Leisure passengers? Medical use? Military base on or nearby? Educational? Concessions? Leases? Through-the-fence? Capacity issues? Other?

Self-assessment toolkit 73 Dominant industries/companies Notes Percentage of airport revenue Industry/industries in area? Employer(s) in area? Company/companies in area? Manufacturer(s) in area? Military base(s) in area? Airport on base? Cargo hub? SOUND BITE It was the city’s interest in economic diversification, rather than a focus on generating revenue, that spurred the city’s investment/interest in the airport. The development goal was to bring jobs to the local community and create a balanced, growing community. 4.8 Dominant Industry or Company KNOW At some airports, a particular industry dominates business activity through a headquarters or major hub operation. That industry could be an anchor for developing facilities for similar business sectors or support services, as like industries often cluster together. Conversely, examination of a dominant industry may also reveal vulnerabilities, such as an over-reliance on that business and the need to diversify. HAVE The answers to the questions in this section of the toolkit will help to identify whether a dominant industry exists in the area of the airport and whether that industry may be expanding. The complete Dominant Industry or Company Checklist is provided in Appendix A, “Chapter 4 Checklists,” and a customizable copy of the same checklist can be downloaded from the ACRP Research Report 176 webpage. DOMINANT INDUSTRY OR INDUSTRIES? Does the area have a dominant industry? Are there many different businesses in the same field (i.e. distribution, manufacturing, insurance, high tech, or medical)? What percentage of airport revenue can be attributed to this industry or industries? DOMINANT EMPLOYER, COMPANY OR MANUFACTURER? Is there a dominant company in the area? Is there one, single company that provides a significant number of jobs in the area? What percentage of airport revenue can be attributed to it? MILITARY BASE? Is a military base on-airport or nearby? Is the airport part of a military facility? What percentage of airport revenue can be attributed to it? CARGO HUB? Are major freight carriers dominating the airport? What percentage of airport revenue can be attributed to these carriers?

74 Generating revenue from Commercial Development On or adjacent to airports HOW MUCH AIRPORT REVENUE ATTRIBUTABLE? For the purposes of this guidebook, the measure of a dominant industry or company is the percentage of airport revenue that can be attributed to it. Use the information gathered in the previous part of the checklist to consider how dominant the industry may be based on the comparative revenue to the airport. DOMINANT INDUSTRY GROWING? If a dominant industry is identified, look at market data to determine if it is growing as an industry and use airport data to look at trends in airport use. DO The answers to questions in this section of the toolkit will help guidebook users consider several possible impacts to on-airport development from the presence of a dominant industry. If there is a dominant industry, it is important to consider whether on-airport development strategies may benefit from its presence. Are there ways the airport can work to diversify revenue over time? It is also important to consider the impact to airport development investments if the dominant industry experiences a financial decline or collapse. A single market concentration may be seen as a higher risk factor for development. Growth Notes Market data shows industry growth? Airport data shows use trends?

Self-assessment toolkit 75 4.9 Business Trends and Projections for Airport Revenue KNOW Just as important as identifying major business segments is reviewing their existing and continuing or changing role in the airport’s revenue stream. Major business sectors can provide the rationale for a particular land use plan or development project if they are growing or have the potential to grow with improved airport facilities. In some instances, specific strategies were implemented to combat recession impacts on or around the airport. For example, the loss of air traffic at Bradley International Airport in Connecticut prompted a change in airport governance structure and the creation of development incentives. Guidebook users also can identify any special strategies that were employed to combat recession impacts. HAVE The answers to the questions in this section of the toolkit will help guidebook users create a profile of business trends and anticipate future directions. The complete Business Trends and Projections for Airport Revenue Checklist is provided in Appendix A, “Chapter 4 Checklists,” and a customizable copy of the same checklist can be downloaded from the ACRP Research Report 176 webpage. Airport revenue by segment: • • • SOUND BITE Ag- and Bio Sciences is a focus industry as a result of the market study recently done for the city as a whole. SOUND BITE The regional economy is still depressed and the social circumstances (poverty, education level, local budgets for improvements) add another challenge to attracting businesses. AIRPORT REVENUE SEGMENTS? Over the past 5 years, what has happened with specific business segments? Have they increased or decreased? AIRPORT REVENUE TRENDS? Over the past 5 years, has airport revenue grown or contracted overall? Is there a decline in a business segment? Is the decline due to a lack of airport facilities? Could the decline be stabilized or reversed by a development project or by airside improvements? Is the decline due to other factors and likely to continue despite a proposed development project? Has there been decline in others? Are these segments unlikely to have a role in attracting users to a development project? Which segments? Have certain segments continued to grow? Will these segments keep their importance in the airport’s revenue projections? Which segments? Some airports and their surrounding regions suffered greatly during the Great Recession. Some bounced back quickly, and others are still struggling. Economic shifts in the region over the past 5 to 10 years—whether positive or negative—have likely had a direct impact on the airport’s revenue stream and general financial health. As part of this self-evaluation, it is important to consider what is happening with regional business sectors as well as what that means to the airport’s current financial health.

76 Generating revenue from Commercial Development On or adjacent to airports MAJOR INDUSTRY TREND? What is the trend of airport revenue from the dominant industry (if any)? The airport’s financial health: HAS THE AIRPORT LOST OR GAINED MAJOR CUSTOMERS? Are these losses associated with a dominant industry or employer? An airline? WHAT IS THE AIRPORT’S GENERAL FINANCIAL STATUS? Is the airport’s general financial status profitable? Stable with assistance? Uncertain? Weak or in decline? HAS THE AIRPORT RECOVERED FROM RECESSION IMPACTS? Can elements of the airport’s current financial status be traced to the Great Recession? Have airport revenues shown a rate of increase in recent years? Has the airport fully recovered from recession impacts? HAS THE AIRPORT ADOPTED NEW INITIATIVES? Have airport management or the ownership agency adopted new strategies to help the airport overcome the impacts of the recession specifically? Are there other new initiatives? Airport revenue by segment (Last 5 years) Notes Airport revenue trends? Grown or contracted? Airport revenue segments? Which have grown continuously and will remain important? Which have declined and are unlikely to attract development? Any declining that may improve through development or airside improvements? Major industry trend?

Self-assessment toolkit 77 DO Use the information collected regarding business trends and projections to anticipate future trends of business segments in the area and the associated airport revenue. If market segments are expected to grow, that is positive for airport development plans. Information about market segments that are expected to grow can help to shape airport development strategies. However, if projections anticipate future decline in segments that account for significant portions of airport revenue, caution and more investigation is advised unless the decline can be addressed by providing a particular facility not currently available. Consider also at this point the general financial health of the airport. If the airport’s current financial status is strong, that is positive for airport development plans. If the airport’s current financial status is uncertain or weak, and if development plans are being looked at as a solution, it will be important to understand the costs involved and the financial risk associated with development revenue strategies. Airport financial health Notes Major customers lost or gained? General financial status? Profitable? Stable with assistance? Uncertain? Weak/declining? Recovery from recession impacts? What elements traceable to Great Recession? Has revenue increased? Is financial recovery ongoing or complete? What new strategies or initiatives are ongoing?

78 Generating revenue from Commercial Development On or adjacent to airports 4.10 Funds for Development KNOW The development process, including planning, engineering, and approvals, can be lengthy and expensive. Before embarking on a project, the airport should identify the funding available to dedicate to this process, the origin of the funds, and the likelihood that funding will be available as needed over time. Because this is an initial step in the evaluation process, and a development budget is not yet available, broad estimates or orders of magnitude may be used at this point. The results will be general estimates rather than precise numbers, but the calculation has value. Identifying funding sources and considering whether uncertainties are associated with obtaining and maintaining funds can reveal issues that may affect the viability of pursuing a development project. As funding sources are identified, a further consideration is whether existing restrictions on the use of airport funds may be imposed based on their source. AIP grant funds and passenger facility charge (PFC) revenue, for example, generally can only be used for projects that provide direct benefits and improvements to aviation operations or safety. These funds are usually not available for commercial development projects. A final consideration is the amount of funds that will be needed “out of pocket” for the initial investigation phase described in this guidebook. This information can help to reach a “Stop” or “Go” decision about whether on-airport development is a feasible option for revenue generation. Dedicated staff time and some funding for consulting fees will be needed in order to gather accurate information on the real estate market, anticipated construction costs, and permitting requirements. In this guidebook, Section 6.22 on “Consulting Needs—Building the Project Team” provides a discussion of areas where consulting expertise may be needed. Legal guidance may be needed as well. Larger airports or airports owned by a larger municipality may have these professional skills in house, which will reduce consulting fees but increase the staff investment during the exploration period. HAVE The answers to the questions in this section of the toolkit will gather information about airport or municipal funds that may be dedicated to development. The complete Funds for Development Checklist is provided in Appendix A, “Chapter 4 Checklists,” and a customizable copy of the same checklist can be downloaded from the ACRP Research Report 176 webpage. CAN AIRPORT OR MUNICIPAL FUNDS BE DEDICATED FOR DEVELOPMENT? Do budget projections show funds available that could be allocated to a project? Are the funds available for this purpose, or are they mandated to go back into airport operations? How much funding is available annually? SOUND BITE The system is a free-enterprise fund, totally supported by revenue generated from its operations. Grants are used to cover capital expenses.   Airport or municipal funds Notes Annual amount available?

Self-assessment toolkit 79 SOURCE OF FUNDS: PRIVATE, SUBSIDY, OPERATING INCOME? If the current budget does not have funds that could be specifically dedicated to development, are fee increases permissible to support development? Is this feasible based on current political and economic conditions? WILL FUNDS CONTINUE TO BE AVAILABLE OVER A 5- TO 10-YEAR HORIZON? Can funds be committed for the course of the project? Are they subject to annual appropriations or a political process (that could be interrupted before completion)? BONDING CAPACITY? Does the airport ownership have the ability and debt capacity to issue bonds? CAPITAL MARKETS/BANK LOANS? What are loan availability and interest rates? DO The answers to the questions in this section of the toolkit can help guidebook users understand what funds may be available for the development project, both for the initial investigation phase and then over the course of the project, including the design, permitting, construction, and leasing phases. The level of available funds can indicate whether a need exists for a joint venture partner or master developer. For airports with limited funding, further analysis is advisable to determine the most productive use for that limited investment, including whether it is best used for development or another revenue strategy. The Strategic Business Plan and budgeting projections can also reveal these issues. These topics are examined further in the guidebook in Chapter 6, “Implementation Toolkit.” Funding sources Notes Sources of funding? Private? Subsidy? Operating income? Feasibility of fee increases? Potential budget adjustments? Fund availability over 5 to 10 years? Bonding capacity? Capital markets/bank loans? Availability? Interest rates?

80 Generating revenue from Commercial Development On or adjacent to airports - is 4.11 Risk Tolerance for Development Projects KNOW Real estate development always involves risk. In this conversation, risk refers to the possibility that a real estate development may lose money or may not produce revenue according to the desired schedule. This concept must always be kept in mind, particularly for an airport. Airports are unique because the core business is not real estate, and development will be an accessory business strategy intended to bring in extra revenue. Why is real estate development risky? Even with extensive experience and informed decision making, development is risky because it is subject to external factors, such as: The local market The national and regional economy Competition from other projects Unforeseen site and construction conditions Lengthy approvals Meanwhile, much investment can be required for land development, engineering, marketing, and construction. Construction may include building structures and/or installing infrastructure to make sites “shovel-ready.” Why is understanding the airport’s risk tolerance important? The purpose of spending money to reap a benefit from the investment. The airport sponsor must understand the level of risk that is acceptable in pursuit of commercial development. The acceptable level of risk is driven primarily by conditions at the airport and can depend on: Available financial resources. If these are not deep, there is little room for risk. Governance. For publicly owned airports, there may be legal or regulatory limits on investments that are not directly airport-related, as well as political sensitivities. Timing. The airport may need revenue enhancement in the short term, or it may be able to wait a longer time for an investment to mature and provide greater returns. HAVE Defining the right level of risk is a case-by-case effort, but should involve consulting with governance and examining financial reports and plans. The answers to the questions in this section of the toolkit may help provide insight into the risk tolerance of the airport. The complete Risk Tolerance for Development Projects Checklist is provided in Appendix A, “Chapter 4 Checklists,” and a customizable copy of the same checklist can be downloaded from the ACRP Research Report 176 webpage. SOUND BITE Because of the low investment risk and the positive support from the community and state, the development sites were created at the airport. However, development has been limited as predicted by the market conditions analysis.

Self-assessment toolkit 81 IS GUARANTEED INCOME IMPORTANT? The priority for the airport may be to create a fixed income source that will fluctuate minimally over time, with reliability and long-term leases preferred. This is suitable if the airport’s risk tolerance is relatively low. ARE THERE LEGAL RESTRICTIONS ON RISK? Are there relevant laws and regulations that may constrain the extent and type of investments the airport can make, including limitations on partnerships and revenue sharing? If so, these legal restrictions may limit the airport’s risk tolerance at the outset. CAN THE AIRPORT ASSUME MARKET RISK FOR GREATER UPSIDE? Airports with deeper resources can consider development plans for multi-phase, longer-term projects. These projects can be subject to business cycle changes, but they can also provide potentially greater revenue from rising prices and as multiple income sources develop over time. Long-term, detailed planning is essential for such projects to be successful, with particular phases of development defined for specific time horizons. Market risks and rewards can also be pursued through a partnership with a developer that includes cost and revenue sharing, and also participation in rent income. An airport’s ability to follow such a strategy indicates a higher risk tolerance. DO The information gathered in this section can be used to determine the level of risk that can be assumed by airport ownership: High? The airport has broad financial support from governing agencies or partners, and can afford investments that have longer-term or less certain returns but also have the potential for more income. A high risk project also has the potential for higher returns. Moderate? The airport can commit a more limited amount of resources (e.g., to achieve greater land or building rents) but may want protection from market uncertainties. Low/minimal? The airport cannot afford to expend a great deal on development preparation, and/or must look for stable income streams for minimal investment for financial, legal, or political reasons. The determination of risk tolerance has a major effect on development strategy. Conclusions about the airport’s risk tolerance will be an important metric when considering development options through the rest of the guidebook activities. For example, if the tolerance for risk is low, Risk tolerance factors Notes Importance of guaranteed income? Legal restrictions on risk? Constraining laws/regulations? Partnership/revenue sharing limitations? Assume market risk for return? Long-term, detailed planning? Pursue developer partnership?

82 Generating revenue from Commercial Development On or adjacent to airports strategy may be limited to subdividing parcels of land for sale or lease, aiming for reliable, stable revenue. If the risk tolerance is higher and the sponsor wants the opportunity to benefit from a good market, a strategy of percentage rents or equity participation with a partner may be chosen. An airport sponsor undertaking land improvements and building construction without a partner is assuming the greatest risk. This strategy will be explored in more detail in the subsequent toolkits.

Self-assessment toolkit 83 4.12 Development Goals KNOW The self-assessment elements explored so far can be combined to reach a conclusion regarding the motivation of the airport for exploring development. The airport’s motivation is a critical part of the self-assessment, because it is important for the airport to have a realistic view of what development can or cannot accomplish for revenue enhancement. For example, if the airport has a very urgent need for immediate revenue, a commercial development project–with its necessary time frames to yield income–may not be the best strategy. The airport’s development goals also must be correlated with the conclusions about the airport’s risk tolerance as developed from that checklist. This self-assessment exercise also may be used to develop goal statements that are expressed quantitatively, such as these examples: A statement defining the target revenue from a development project, and the associated timeframe of the return (short term, middle term, or long term). A statement that the airport is looking to achieve a stable revenue source from currently unproductive assets. A statement that the airport needs a cash infusion in the short term to continue to operate and a definition of the amount needed. Perhaps the airport functions as an economic development leader, or is being encouraged by other agencies to become one. The local government may approach the airport as a potential source of job creation, or the airport may have been approached by a developer with a proposal for a non-aeronautical use. If the idea of development has come from a third party, rather than as a conclusion of the airport’s own planning process, it is even more important to examine the airport’s goals and motivations to be sure the proposal will benefit the airport. Articulation of goals also provides an initial basis for determining the best strategy for development, including the type of development, how much investment or construction should be undertaken, and whether to involve partnerships. HAVE The answers to the questions in this section of the toolkit will help guidebook users identify and articulate the airport’s motivation for embarking on a development project. The complete Development Goals Checklist is provided in Appendix A, “Chapter 4 Checklists,” and a SOUND BITE Revenue generation was not a key factor in the discussion, and at this time there are not any specific goals for revenue generation for the airport. Motivation comes instead from: • Making a higher, better use of the land • Creating jobs • Community growth • Increasing air service and air cargo activity at the airport

84 Generating revenue from Commercial Development On or adjacent to airports customizable copy of the same checklist can be downloaded from the ACRP Research Report 176 webpage. EXCESS UNPRODUCTIVE LAND? Is land available that is not needed for aviation use according to the ALP or Airport Master Plan? Is it bringing nothing to the airport’s bottom line, or is it needed as a buffer for noise or safety? JOBS FOR LOCAL ECONOMY? Is the airport under pressure to produce jobs or tax revenue? Is the motivation coming from other governmental agencies? If the motivation is not internal, it is important to examine carefully whether the airport itself will benefit. Even if there are clear community benefits, such as new jobs or available development property, the development should still be evaluated in terms of cost or revenue to the airport. ADDITIONAL REVENUE NEEDED FOR LONG-TERM AIRPORT SUSTAINABILITY? Do airport business trends show the need for additional revenue? Do market trends suggest demand for commercial or industrial development? CRITICAL TO SUPPORT AIRPORT OPERATIONS? Will the airport fail without additional income in the short term? If the answer to this question is “Yes,” that could signal an urgent situation that cannot wait for the development process. REVENUE GOALS FROM DEVELOPMENT? Has the airport identified specific revenue goals (i.e., X dollars over Y years) to support the airport? SHORT TERM OR LONG TERM? Are there immediate needs for an increased revenue stream, or is the goal to see development and revenue over the 20-year master plan horizon? HOW LONG CAN THE AIRPORT WAIT TO RECEIVE REVENUE? Can the airport continue operating in a financially sound manner until the development produces revenue? This could entail a wait of several years and some up-front financial investment, depending on the nature of the project. HAS THE AIRPORT BEEN APPROACHED BY A DEVELOPER WITH A PROPOSAL? If the initiative comes from a developer, what does the developer offer to the airport? IS THERE GROWING MARKET DEMAND FOR COMMERCIAL/INDUSTRIAL LAND? A healthy market and available land may present a good opportunity for new airport revenue. SOUND BITE One airport that has had success attracting business development to the airport offered this advice: Ask companies to provide information about their financial capabilities, their first phase of market, and ask for earnest money that is 10% of the value. They should be able to talk about their infrastructure needs too. If they can’t do those things, they are probably not yet a viable business option.

Self-assessment toolkit 85 DO The information gathered by answering the questions in this section of the toolkit can help guidebook users to clearly express the airport’s development goals both qualitatively and quantitatively. If the answers to these questions show that interest in development is motivated by an objective to provide additional revenue over time and not to respond to an immediate revenue shortfall, that presents a promising scenario for pursuing development. An urgent need for revenue or a desire for a windfall is a less positive or realistic situation. Also, an external initiative—whether from a developer or from a government agency seeking job creation—can reveal a new opportunity for the airport; however, it may not be in the airport’s best interest in terms of revenue and sustainability. This scenario needs to be carefully examined. Factors for development Check to select Notes Excess unproductive land? Jobs for local economy? Additional revenue needed for long-term sustainability? Additional income critical to operations? Has airport identified revenue goals over time? Goals for increased revenue? Short-term goals? Long-term goals? Can airport remain financially sound between investment and return? Developer proposal on the table? Benefit to airport? Growing market demand for commercial/industrial land?

86 Generating revenue from Commercial Development On or adjacent to airports SOUND BITE Citizens of the host municipality have a historic mistrust of what happens at the airport. SOUND BITE The city extended water and sewer to the industrial park area using a state revolving loan fund. This opened up more than 400 acres for industrial development. There is no master plan for development. 4.13 Community Context KNOW The airport’s position in the community is a topic that is touched on at many points in this guidebook. One of the most salient principles conveyed in the industry interviews and case studies conducted for this research was that community relations and alignment of goals between the airport, local government, and economic development agencies is critical to the success of an airport development project. Community relationships are critical and can affect the development process from the beginning to the end. For example: Positive Relationships: Positive relationships with local and state jurisdictions can create partnerships for improving transportation and utilities to support new development. Good relationships between the airport and the community can help to spread accurate and positive information about an airport-related development project. Approvals may be fast-tracked if airport-related development is seen as a source of tax revenue and job growth. If the airport’s goals are consistent with those of the municipality or region, economic development agencies can help to market the project to potential lessees or purchasers. Negative Relationships: Negative relationships can foster community opposition that can derail development approvals or result in onerous conditions during the permitting process. Environmental, traffic, and air quality concerns can, if raised by a concerned public, create considerable delay and expense in the process. Mistrust of the airport or unresolved conflicts can result in inaccurate or alarmist information being circulated through the community. This can stop a development proposal in its tracks. Alignment of goals between the airport and the governments, businesses, and residents of the surrounding community—the stakeholders—will be instrumental in the approval, funding, and implementation of a development project. If these relationships have historically been positive, that is a plus for the airport sponsor. If these relationships have historically been negative, some effort will likely be needed to repair and improve them in order for a development project to be successful. In one case study examined by the ACRP Project 03-39 research team, a new private airport owner working on improvement plans found himself a victim of the poor relationships that had existed between the community and the prior owner. Although the new owner was trying to reinvent the airport, years of mistrust were creating obstructions at every turn.

Self-assessment toolkit 87 HAVE Developing the answers to this part of the self-assessment will help guidebook users characterize and consider the existing relationships between the airport and key stakeholders. The complete Community Context Checklist is provided in Appendix A, “Chapter 4 Checklists,” and a customizable copy of the same checklist can be downloaded from the ACRP Research Report 176 webpage. HAVE LOCAL STAKEHOLDERS BEEN IDENTIFIED? WHO ARE THEY? Whether it is publicly or privately owned, the airport’s stakeholders are similar and include: nearby residents; business owners; elected officials on local, county, and state levels; economic development officials; business organizations; and competing real estate developers. Conducting an inventory to identify the local stakeholders is an important step. SUMMARIZE RELATIONS BETWEEN THE AIRPORT AND THESE STAKEHOLDERS BASED ON THE SUGGESTED QUESTIONS AND OTHER AVAILABLE INFORMATION: • • • IS A LOCAL INDUSTRY ADVISORY BOARD OR OTHER SYSTEM IN PLACE TO REGULARLY COMMUNICATE WITH STAKEHOLDERS? Some airports conduct regular outreach sessions with the community or create advisory councils that include participation by business and government leaders. The presence of this type of board is usually indicative of a positive relationship. DOES A PUBLIC INVOLVEMENT PROGRAM EXIST? OTHER VEHICLES FOR COMMUNICATION? Does the airport issue newsletters or electronic information telling the public what is happening at the airport? Does the airport communicate on social media? Are there “visitors’ days,” outreach to schools, or other types of public involvement? IS THE AIRPORT CONSIDERED AN IMPORTANT ECONOMIC ASSET BY CITY OR REGION? This is an important plus for development plans. If the airport is seen as a producer of jobs and tax revenue, it is likely to get support for actions to improve its financial standing. Local stakeholders Notes Identify local stakeholders? Public? Private? Surrounding Landowners?—Are surrounding landowners primarily residential (home- owners) or commercial (business owners)? Do they make use of the airport? Do they complain about noise, air quality, or traffic? County/State Government?—If the airport is owned by the state or county, is the airport regarded as an asset and supported by elected and agency officials? Have they helped to get funding for airport projects? Local Government?—Do local government offices field complaints? Have they worked with the airport on compatible zoning? Does the airport have representatives on any local commissions or committees? If the airport is municipally-owned, are other munic- ipal departments or officials supportive or adversarial?

88 Generating revenue from Commercial Development On or adjacent to airports ARE THE AIRPORT’S GOALS ALIGNED WITH THOSE OF THE CITY AND REGION? Do local and regional plans identify or allow for airport development? Do the surrounding communities agree that the airport should grow, and that what is good for the airport is good for the community? If not, what are their concerns? HAS FRICTION OCCURRED BETWEEN THE AIRPORT AND THE COMMUNITY REGARDING OPERATIONS, EXPANSION, OR NOISE? Have there been negative news stories regarding the airport? Are there frequent complaints? Do residents see the airport as a hazard? HOW MANY JOBS ARE DIRECTLY AND INDIRECTLY SUPPORTED BY AIRPORT OPERATIONS? ARE LOCAL AND REGIONAL AGENCIES AWARE? Does the airport sponsor or agency analyze and share information about airport jobs? Is this information published? ARE MANY OTHER COMMERCIAL/INDUSTRIAL DEVELOPMENT PROJECTS IN THE AREA? WOULD THE DEVELOPERS VIEW AIRPORT DEVELOPMENT AS COMPETITION? This situation can be tricky, especially for a publicly owned airport that may be viewed as having an unfair advantage or as taking business away from private developers. If heavy competition exists for a limited market, plans for airport development can cause friction. Regular outreach to the business community may head off these conflicts. Relationships with stakeholders Notes Summarize relations with local stakeholders? Local government? County/state government? Surrounding landowners? Local industry advisory board? Public involvement/other communication? Viewed as economic asset by city or region? Goals aligned with city and regional goals? Friction related to operations, expansion, or noise? Jobs directly and indirectly supported by operations? Regional agency awareness of job support? Other commercial/industrial developments in area? Airport development viewed as competition?

Self-assessment toolkit 89 DO If the answers to the questions in this section show active involvement with and support from the community, the airport can count that as a benefit to achieving a successful development project. If the answers show little involvement or poor relations, the airport should consider efforts to improve relationships and communication. ACRP Report 155: Aligning Community Expectations with Airport Roles provides guidance and supporting tools for community outreach efforts.

90 Generating revenue from Commercial Development On or adjacent to airports 4.14 Summary What should be the result of the self-assessment? The self-assessment should lead the airport sponsor to one of two conclusions, “Stop” or “Go.” The first is a determination that other strategies for revenue enhancement could be less expensive, more rewarding, or less risky. The second is a decision to proceed with the next steps in exploring a development project to augment revenue. In determining whether to “Stop” or “Go,” an airport sponsor will examine the answers to the following questions: Is the airport interested in pursuing development for the right reasons and with realistic expectations? Will the project consume funds that are better dedicated to improvement of aviation facilities? Can the airport commit staff and financial resources to investigate opportunities and design and implement a plan? Can the airport wait the period of time necessary to start receiving development revenue? Is there a realistic opportunity to absorb the expenses needed for a development project? Is development likely to be supported by the community? Is there a planning and management structure in place to manage the development process? Are new personnel required to lead the development effort? Is a partner essential for the development project? Are facility investments necessary to grow airport operations and attract development customers? Will airport users anchor demand for the proposed development? Which of the five tiers (introduced in Chapter 2) correctly classifies the airport land? How will that classification affect development planning? All of these questions can be summed up in two larger, fundamental questions: 1. Is development too risky, time consuming, or expensive for the airport’s economic position? 2. Alternatively, does development present a unique opportunity to sustain the airport’s financial feasibility over the long term? If the self-assessment reveals many negative answers to critical questions, alternative approaches to revenue enhancement may need to be considered, possibly including TTF opportunities and encouraging off-airport development to increase the airport customer base. In this guidebook, Chapter 7, “Off-Airport Considerations and Revenue” provides a discussion of these opportunities. ACRP Report 121: Innovative Revenue Strategies—An Airport Guide, and ACRP Report 114: Guidebook for Through-the-Fence Operations are resources for more information.

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TRB's Airport Cooperative Research Program (ACRP) Research Report 176: Generating Revenue from Commercial Development On or Adjacent to Airports provides guidance for developing or redeveloping on-airport and adjacent properties so that development can contribute to overall airport revenue.

The report explores methods and considerations and provides specific checklists to assist airports in preparing and implementing a commercial development plan. It addresses advantages and disadvantages of on-airport versus off-airport land development opportunities, as well as marketing and legal issues.

The report includes case study information that highlights successful and unsuccessful examples of commercial development on and around airports. A customizable MSWord file containing the checklists is available for download.

Disclaimer - This software is offered as is, without warranty or promise of support of any kind either expressed or implied. Under no circumstance will the National Academy of Sciences, Engineering, and Medicine or the Transportation Research Board (collectively "TRB") be liable for any loss or damage caused by the installation or operation of this product. TRB makes no representation or warranty of any kind, expressed or implied, in fact or in law, including without limitation, the warranty of merchantability or the warranty of fitness for a particular purpose, and shall not in any case be liable for any consequential or special damages.

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