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

Chapter: Chapter 7 - Off-Airport Considerations and Revenue

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Suggested Citation:"Chapter 7 - Off-Airport Considerations and Revenue." 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 7 - Off-Airport Considerations and Revenue." 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 7 - Off-Airport Considerations and Revenue." 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 7 - Off-Airport Considerations and Revenue." 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 7 - Off-Airport Considerations and Revenue." 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 7 - Off-Airport Considerations and Revenue." 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 7 - Off-Airport Considerations and Revenue." 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 7 - Off-Airport Considerations and Revenue." 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 7 - Off-Airport Considerations and Revenue." 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 7 - Off-Airport Considerations and Revenue." 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 7 - Off-Airport Considerations and Revenue." 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 7 - Off-Airport Considerations and Revenue." 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 7 - Off-Airport Considerations and Revenue." 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 7 - Off-Airport Considerations and Revenue." 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 7 - Off-Airport Considerations and Revenue." 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 7 - Off-Airport Considerations and Revenue." 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 7 - Off-Airport Considerations and Revenue." 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 7 - Off-Airport Considerations and Revenue." 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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212 C h a p t e r 7 Off-Airport Considerations and Revenue 7.1 Introduction Earlier sections of the guidebook addressed the topic of on-airport development for revenue generation. This chapter considers opportunities for airports to generate revenue from off- airport property development. Creating or participating in off-airport economic activities and development is a powerful way for an airport to integrate itself as part of the economic life and vision of the community and businesses it serves. Airport authorities have always had an interest in the uses of land adjacent to the airport. In most cases, airport authorities are satisfied if such land uses are airport compatible. In reality, however, this is not a completely successful land use outcome. Airport authorities should aim not only for compatible land uses, but also for land uses that will contribute, either directly or indirectly, to airport revenues. Revenue generation from off-airport property—land that the airport does not control—can be the result of various strategies that are explored in this chapter. Airports are seldom thought of as active partners in a conversation about community economic development. For several reasons, however, this approach may be selected either in place of or in addition to on-airport development. They include the following: Risk is lower. The airport does not necessarily have a direct financial investment in the development. It can be quicker. Private development is not subject to federal funding processes or to FAA review (beyond the requirements that apply to all development, such as Form FAA 7460-1, Notice of Proposed Construction or Alteration). It may be the only land available. Off-airport land may be the only option if no remaining land exists on-airport to accommodate development activities (i.e., all available airport land is fully developed). The off-airport land may be better served by utilities and/or have fewer development restraints. The toolkit chapters in this guidebook included Stop/Go decision points at which the airport sponsor was asked to consider whether the concept of on-airport development made sense financially. Would the development likely be profitable for the airport while remaining within an acceptable risk tolerance? If the answer was “no,” the airport was directed to this chapter for more information on options for off-airport development as a revenue generator. As the airport sponsor explores this path, it will be important to recognize that the airport has the economic potential to attract and support development. The airport can serve business

Off-airport Considerations and revenue 213 interests directly, by transporting goods or sales and service (employees) to and from the airport location. In this case, private development remits revenue directly to the airport sponsor through access or user fees. The airport also can serve business interests indirectly, by bringing clients to the area and by supporting the case for business location in the area. In this case, the airport receives incremental business revenue from increased use of airport facilities. The community may recognize that the airport’s presence adds value to the area because it is an important part of the transportation network, representing a significant public investment as well as access to air travel. At the same time, the airport may recognize that what happens on the other side of the fence has a potential economic impact on the airport. With this in mind, a creative airport manager can begin to consider how the economic value of the airport can be leveraged to stimulate development-related revenue for the airport. Rather than waiting for development to happen, the airport can be proactive and encourage the type of development that will provide revenue for the airport. Airports should feel completely empowered to be proactive and to actively encourage off-airport developments that can contribute to airport revenues. Although the airport does not control off-site property, the airport can think outside its boundaries and work with adjacent property owners to create a mutually beneficial development synergy. The airport also can think about how to work with local policy makers to influence policy decisions and encourage investments on off-airport property that benefit the airport. To this end, this chapter includes discussion of all of the following topics: TTF Operations (Tier 4) Community Land Use Planning for Revenue Generation (Tier 4 and Tier 5) Economic Development and Business Attraction (Tier 4 and Tier 5) Public Finance Tools for Airport Revenue Generation (Tier 4 and Tier 5) Each discussion includes text and checklist sections. As in the preceding toolkit chapters, an icon provided in the title bar of checklist sections acts as a reminder that the complete checklist is included in the guidebook appendix: If the airport sponsor does not initiate planning for development of property near the airport but such planning or development is begun by other sources, airport management is encouraged to join the conversation as an active participant to investigate and develop proactive approaches that ensure the airport’s interests are represented. As was discussed in the earlier chapters, the airport needs to consider whether a development initiative from another source is likely to generate airport revenue, given that new development near the airport does not automatically result in revenue for the airport. The means and strategies discussed in this section of the guidebook can create airport revenue opportunities and also can serve as a powerful foundation for integrating the airport with the economic goals, land use zoning, local workforce, and infrastructure planning and investment of the host community. In lieu of outright ownership or control, an airport can use its local influence and economic significance to partner with other landowners, businesses, and local public entities for the economic and social benefit of all concerned. Creating or participating in off-airport economic activities and development is a powerful way for an airport to integrate itself as part of the economic life and vision of the community and businesses it serves.

214 Generating revenue from Commercial Development On or adjacent to airports 7.2 Developing Airport Revenues from Tier 4 and Tier 5 Properties Tier 4 and Tier 5 properties have been identified as properties neither owned nor controlled by the airport and without access to the airport airfield (see “The Five Tiers,” in Chapter 2). They may immediately adjoin the airport and share a common property line, or they may be near the airport but not share a common property line. The purpose of this section in the guidebook is to explore and identify means and strategies by which an airport can accrue revenues, either directly or indirectly, from Tier 4 and Tier 5 properties that are neither owned nor controlled by the airport. Off-airport revenue generation has a high potential to generate revenue for the airport while at the same time offering a lower risk/liability exposure. Developing reliable airport revenues from properties not owned or controlled by the airport is doable. Numerous implementable means and strategies exist by which airports can reliably develop, over time, consistent and significant direct and/or indirect revenues from Tier 4 and Tier 5 properties. It is true that ownership and/or control of property provides more means by which to directly manage revenue-generating opportunities, but it is not always required. In lieu of outright ownership or control, an airport can use its local influence and economic significance to beneficially and cooperatively partner with other landowners, businesses, and local public entities for the economic and social benefit of all concerned. Airport management teams should consider taking a broad and strategic view in respect to revenue generation and not limit themselves to on-airport revenue opportunities alone. Airport participation in the off-airport economy has the powerful and tremendous advantage of further integrating the airport into the economic life and vision of the host community. Such community economic integration is absolutely vital for developing and reinforcing community support of the airport and its relevance to the community and region. Many traditional airport revenues fall under certain very recognizable general sources. These classic general sources include: Direct land lease revenues Leasing of structures Fuel flowage fees Landing fees Passenger enplanement fees Tiedown fees Two very serious issues can arise when, or if, an airport is almost completely dependent on these classic revenue sources. The first issue is price-based competition from or against other airports. This occurs when one airport reduces its fees and charges to capture market share from another airport. That airport may retaliate by reducing its fees and charges even more. And so it can go, back and forth, until neither airport generates sufficient net revenues to adequately support its operational and capital budget needs. Such race-to-the-bottom bidding wars on revenue sources can be very destructive. The second serious issue for airports with an undiversified revenue base is economic exposure during an industry recession or downturn. A generalized industry downturn can put airports with undiversified revenues into a very difficult financial crisis. The long-term defense against—and a solution to—such exposure is for an airport to develop a

Off-airport Considerations and revenue 215 diversified revenue base that is less dependent on the volume of the airport's aviation activity alone. Airport management teams do have opportunities to develop reliable and long-term revenue sources that go beyond the routine and traditional sources. These opportunities can go beyond the airport boundaries and involve properties or activities neither owned nor controlled by the airport. It is entirely appropriate for airport management teams to look beyond the airport boundary at available property and land developments occurring adjacent to or near the airport that are owned or controlled by other parties. Airport management teams should view properties adjacent to or near the airport as potential partners with shared and common interests in coordinated land use or development. Several of the means and strategies identified in this section may involve long-term or quite detailed local and regional planning efforts, coordination and partnering with non-airport parties, the enactment of specialized local land use zoning, and potentially even special local or state legislation. Almost every strategy discussed in this section creates opportunities for airports to engage in community outreach and involvement initiatives.

216 Generating revenue from Commercial Development On or adjacent to airports 7.3 Through-the-Fence Operations (Tier 4 Property) KNOW Through-the-fence (TTF) operations combine off-airport development with access to the airport’s airside infrastructure. A TTF operation takes place on property adjacent to the airport that is not owned by the airport, and access is provided from that property onto the airfield. This is Tier 4 property as defined in Chapter 2 of this guidebook. In this situation, private development takes place on private property with private financing, which allows the development to occur at market speed with no financial investment from the airport sponsor. The airport may collect revenue from the business operation through charges for access and other fees. This arrangement offers the revenue benefits of commercial activity without the unique challenges of on-airport development. In Arizona, Scottsdale Airport provides an excellent example of how commercial TTF operations can be incorporated into airport operations (see “Success Stories” in Chapter 1). TTF arrangements are not, however, a quick fix for generating airport revenue. Specific challenges are associated with granting airfield access to a TTF operation. Federally-obligated airports must comply with grant assurances that do not specifically address TTF access and operations but do have performance requirements for the resulting activity on the airport. Most state grant funds have similar requirements. For airports that are not grant-obligated, the goals of safety, utility, and efficiency are beneficial if not required. Airports considering TTF operations should take care to put plans and regulations in place and establish written TTF agreements to protect the airport. This section of the guidebook addresses TTF operations in a summary fashion. ACRP Report 114: Guidebook for Through-the-Fence Operations provides complete and detailed guidance. Just as ACRP Report 114 is not intended to replace professional expertise when needed, this section of ACRP Research Report 176 is not intended to replace the comprehensive guidance provided in the earlier report. However, this section does provide a topic overview and a basic understanding of the techniques and benefits. In the context of an airport sponsor’s self-evaluation, the information provided is enough for guidebook users to determine whether further investigation is warranted. As described in ACRP Report 114, TTF operations occur when an airport sponsor grants an entity ground access to cross the airport’s property boundary from property adjacent to the airport (and not owned by the airport) to access the airport’s infrastructure and facilities. Typically, TTF operations involve access granted to privately owned aircraft to enter airport property to access airside infrastructure (e.g., runways and taxiways) and engage in associated activities. TTF access also can be granted to vehicles and pedestrians and for a variety of uses including: Residential. Access to the airport from adjacent residential properties . Commercial Aeronautical. Access to the airport by businesses whose activities are related to operation of an aircraft or conducting aircraft operations. Non-Commercial Aeronautical. Access to the airport by businesses that use aircraft for incidental or ancillary purposes such as transporting employees or customers. Non-Aeronautical. Access to the airport by business uses that are not directly related to the operation of aircraft.

Off-airport Considerations and revenue 217 , Approval of a TTF agreement is not part of the statutory authority of FAA; but the agency, if invited, will review and comment on a proposed TTF agreement. FAA will also evaluate a TTF operation once it is implemented as part of an overall determination of that airport’s compliance with its federal grant obligations. This compliance includes being as self-sufficient as possible given the circumstances that exist and ensuring the safety, utility, and efficiency of the airport for the benefit of the public. Although TTF operations are not prohibited (except for new residential TTF activities at federally-obligated commercial service and private reliever airports), FAA discourages TTF operations so that they do not interfere with an airport sponsor’s ability to maintain compliance with grant obligations. If FAA determines that a federally-obligated airport is not compliant with its grant obligations, the airport could be forced to repay grant monies already issued and/or may be barred from receiving future grant funds. This information is not provided with the intention of discouraging TTF operations. Rather, it is provided to encourage airports that are considering a TTF operation to understand the need for care when setting up and overseeing a TTF agreement. A TTF agreement is a written contract or other legal instrument that permits TTF operations and describes the associated conditions including fees. TTF operations present an opportunity for an airport to be as self-sufficient as possible, complying with one of the grant assurances. Compliance with other grant assurances can be demonstrated with a series of policy and regulatory documents. Airport sponsors are advised to keep in mind that a TTF operation—especially a commercial aeronautical operation—could be perceived as economic competition or an economic threat if similar business operations are operating at the airport. Current business owners and operators at the airport should be included as valued stakeholders in the planning process for the TTF agreement. HAVE The process of evaluating the type and extent of the impact TTF operations will have on airport land, infrastructure, and improvements goes beyond the scope of this section of the guidebook but a detailed discussion and customized worksheets are available in Chapter 5 of ACRP Report 114. The following sections list a series of administrative documents that should be developed or modified to correctly reflect the airport sponsor’s position with respect to TTF access and operations. The information is presented to give the guidebook user a sense of the complexity of granting TTF access while maintaining compliance with grant assurances. For airports without grant obligations, reviewing these documents is still a recommended practice for effective decision-making. ACRP Report 114 also contains information on assessing, structuring, and managing TTF operations, which is valuable if the airport sponsor decides to investigate this topic further. The complete Through-the-Fence Operations Checklist for ACRP Research Report 176 is provided in Appendix D, “Chapter 7 Checklists,” and a customizable copy of the same checklist can be downloaded from the ACRP Research Report 176 webpage. PLANNING DOCUMENTS NEEDED (OR NEED UPDATING)? Understanding the purpose of and developing and implementing primary planning documents can help airport management and policymakers assess, structure, and manage TTF operations. Has the airport developed or updated key planning documents, including the: • Airport Layout Plan? Government or Military. Access to the airport by federal and state government and military agencies and institutions that primarily benefit the airport, the community, and/or national defense.

218 Generating revenue from Commercial Development On or adjacent to airports • Airport Master Plan? • Strategic Business Plan? • Airport can adopt an ordinance? • Airport can request that an ordinance be adopted? • Airport can adopt a policy in lieu of an ordinance? TTF ordinance options Check to select Notes Airport adopts an ordinance? Airport requests adoption of ordinance? Airport adopts policy in lieu of ordinance? Planning documents Have Need Current Needs updating Airport Layout Plan? Airport Master Plan? Strategic Business Plan? ORDINANCES? Municipalities that own and operate an airport can adopt an airport ordinance governing the planning, development, operation, and management of the airport. If an airport sponsor decides to permit, restrict, or prohibit TTF operations, the ordinances for the airport will need to be modified accordingly. Airport sponsors that do not have delegated powers to adopt ordinances (e.g., airport authorities, private entities, etc.) can work cooperatively with the local county or municipality in which the airport property is located to adopt an ordinance that addresses TTF operations. If the adoption of an ordinance is not possible, an airport policy addressing the same aspects as the ordinance can serve a similar purpose. PRIMARY MANAGEMENT AND COMPLIANCE DOCUMENTS? These documents make up the administrative toolkit for TTF agreements and operations. They all can be developed or modified to incorporate airport policies, standards, rules, and regulations pertaining specif- ically to TTF operations. LEASING/RENTS AND FEES POLICY? This policy sets forth the parameters for leasing airport land and improvements and outlines the process for establishing and adjusting rents and fees. MINIMUM STANDARDS? These standards convey the qualifications and minimum requirements that must be met as a condition for the right to conduct a commercial aeronautical activity at an airport. RULES AND REGULATIONS? Rules and regulations ensure the safety, utility, and efficiency of the airport for the benefit of the public.

Off-airport Considerations and revenue 219 • FAA? • State aviation organization? • Airport sponsor? • Airport operators, tenants, and users? • Adjacent property owners? • Community? DO Like on-airport development, TTF development arrangements can be complicated; however, TTF operations can be effective in generating airport revenue. The information presented in this section of the guidebook can help guidebook users gain an initial understanding of the benefits, complexities, and risks of a TTF agreement and TTF operations. The section has presented a brief overview of the topic, walking guidebook users through some of the documents and tools that should be developed or revised if the airport plans to move forward with a TTF agreement or operation. If this approach to revenue generation seems to be a good match for the airport, guidebook users are encouraged to refer to ACRP Report 114 for more information. Stakeholders and interested parties Check to select Notes FAA? State aviation organization? Airport sponsor? Airport operators, tenants, and users? Adjacent property owners? Community? Primary management and compliance documents Check to select Notes Leasing/rents and fees policy? Minimum standards? Rules and regulations? Development standards? STAKEHOLDERS AND INTERESTED PARTIES? As the airport sponsor considers granting TTF access, a number of stakeholders can provide value to the conversation by providing guidance, bringing a new perspective, or expressing concerns. Consider gathering input from all of the following stakeholders: DEVELOPMENT STANDARDS? These standards govern the design, construction, or modi- fication of infrastructure, improvements, and facilities on the airport.

220 Generating revenue from Commercial Development On or adjacent to airports SOUND BITE The airport has tried to do as much as possible to set the stage for the right zoning framework. 7.4 Community Land Use Planning for Revenue Generation KNOW Destination zoning around an airport is one strategy to promote the development and implementation of compatible land use zoning around airports. It is also a strategy to generate revenue for the airport. The phrase destination zoning describes the creation of land uses around an airport that will, in and of themselves, generate traffic and new business for the airport. Traffic and new business is generated by businesses that will use the airport for: Business travel for executives, sales representatives, and clients Delivery of products and supplies Training and conference attendance A 200-acre industrial park next to an airport with various high technology businesses is an example of destination zoning and development because it has a high likelihood of developing additional traffic and providing new revenues to the airport through business travel, hangar rental, and delivery of products and supplies in and out of the park. Tenants in an industrial park may use general aviation, air cargo, and/or commercial air services. This type of development can benefit airports that do not have commercial air service. A conference center and hotel complex is another example of destination zoning and development because it, too, has a high likelihood of increasing airport revenues and traffic through increased commercial service travel by people attending events in the conference center. Airports have a considerable self interest in promoting zoning and land uses in areas around the airport that not only are compatible, but also will specifically help generate additional airport traffic and sales. Airports are encouraged to be proactive in proposing zoning and land development plans that will be revenue positive to the airport. To implement destination zoning, the airport sponsor will need to work cooperatively with the local land use authority. Depending on the airport’s location, the effort may extend to two or more municipalities. HAVE The checklist approach used in this section of the guidebook explores the current land use around the airport, whether it supports uses that generate revenue for aviation activities, and whether the airport has an existing connection with the local planning staff and planning commission. The complete Community Land Use Planning for Revenue Generation Checklist is provided in Appendix D, “Chapter 7 Checklists,” and a customizable copy of the same checklist can be downloaded from the ACRP Research Report 176 webpage. LOCAL LAND USE AUTHORITIES?—Who are the local authority/authorities that make land use decisions for the areas adjacent to the airport? These authorities may include a city, township, county, or regional planning authority. Who are the key staff people in each office?

Off-airport Considerations and revenue 221 • Zoning districts? • Permitted uses? • Future land uses? • Permitted uses? Future land uses Notes Identify future land uses Identify permitted uses Current land use around airport Notes Identify zoning districts Identify permitted uses in each district Local land use agencies Authority Key staff names/titles? Yes No City? Township? County? Regional planning authority? Other? Additional notes: FUTURE LAND USES AROUND THE AIRPORT? Do the future land uses permitted near the airport include uses that will generate revenue for the airport? The Future Land Use Map, which is contained in the Community Master Plan, will indicate the future land uses. The text of the Community Master Plan will define the permitted uses in each district. CURRENT LAND USES AROUND THE AIRPORT? Do the current land uses that are permit- ted near the airport generate revenue for the airport? The Zoning Map, which is contained in the Zoning Ordinance, will indicate the zoning districts. The Zoning Ordinance itself will define the permitted uses in each district.

222 Generating revenue from Commercial Development On or adjacent to airports DO The information gathered in this section can help guidebook users discover the current conditions related to destination zoning districts near the airport. If current and planned (future) land uses are already in a destination zoning category, that’s great! If they are not, the airport sponsor can begin a dialogue to change the planning framework to permit and even encourage destination zoning uses near the airport. This conversation can also work to establish compatible land uses and site design standards near the airport. The key idea is that the airport sponsor can be an active part of the community land use conversation and advocate for policies that benefit the airport. Whether the land uses are already in place or need to be modified, it is advantageous for the airport sponsor to establish relationships and a communication pipeline with planning boards and community leaders. This can be done by attending planning meetings or monitoring business items through a review of agendas and meeting minutes every month. When action items may potentially impact land uses around the airport, the airport manager or another airport spokesperson should attend and speak at the meeting or send a letter to be read into the record. Such action items might include a Zoning Ordinance update or a proposed site plan for a new development. The airport sponsor also can offer to make an annual presentation to the planning commission or to a joint meeting of the planning commission and elected officials about the airport and its contributions to the local community and economy, which demonstrates the need for coordination with local land use decisions.

Off-airport Considerations and revenue 223 7.5 Economic Development and Business Attraction KNOW By providing access to air transportation services, airports play an important role in supporting local and regional economies. Airports offer businesses a means of connecting to broader markets beyond the local area by facilitating transport of inbound goods and outbound products on the freight side, and by transporting business travelers and incoming tourists on the passenger side. Beyond this role, however, airports also can serve as regional job centers and influence development in their vicinity. Specifics will depend on the airport’s size, the characteristics of the surrounding community and region, and the airport’s functional role within the aviation network. Each airport contributes in a unique way to its regional economy; however, in each case, the airport can be included not only as a regional transportation asset but also as a business attraction tool and an important feature in the area’s economic development strategy. This topic is explored in detail in ACRP Report 155: Aligning Community Expectations with Airport Roles in the discussion titled “Being Part of the Location Decision.” As was noted in the section on destination zoning, a key idea is that the airport can go beyond its traditional transportation role to take an active part in business attraction initiatives and economic development policy decisions. This is accomplished primarily by participating in work groups and serving on boards and commissions associated with economic development. Although the airport can contribute to economic development initiatives in the community, the economic development itself can increase airport revenue indirectly through increased aviation activity, and it may also generate direct revenue through on-airport or TTF development. HAVE The answers to questions in this section of the guidebook can help guidebook users assess their region’s current economic development landscape. The complete Economic Development and Business Attraction Checklist is provided in Appendix D, “Chapter 7 Checklists,” and a customizable copy of the same checklist can be downloaded from the ACRP Research Report 176 webpage. • A local economic development corporation, downtown development authority or other public organization? • A regional economic development organization? • A local chamber of commerce or other membership organization? • A state economic development initiative? Case Study: Sebastian Municipal Airport, Sebastian, Florida The City of Sebastian, Florida, has made the Sebastian Municipal Airport (see http://www.sebastianairport.com/) the centerpiece of local economic development, and provides information about land and infrastructure available within the airport’s boundaries on the city’s economic development website (see http://sebastianbusiness.org/airport.html). EXISTING ECONOMIC DEVELOPMENT ORGANIZATIONS’ ACTIVITIES? What boards, commissions, and organizations currently promote economic development in the commu- nity and region? More than one organization may serve the same area, and the airport may impact several different jurisdictions. These organizations may include all of the following:

224 Generating revenue from Commercial Development On or adjacent to airports SOUND BITE The airport manager is part of the regional development team. • Tax incentives? • Shovel-ready development sites (roads and utilities in place)? • Labor force initiatives (job training)? • Community investments in quality-of-life features (housing, parks, schools, medical facilities)? Current economic development initiatives Check to select Notes Tax incentives? Shovel-ready development sites? Labor force initiatives? Community investments in quality of life features? Economic development activities by regional authorities or organizations Notes Local economic development corporation? Downtown development authority? Other public organization(s)? Regional economic development corporation? Local chamber of commerce or other membership organization? State economic development initiative? Other? AIRPORT PARTICIPATION STRATEGY? What is the airport’s strategy for participation? Is the airport sponsor already represented on economic development boards, commissions, or organizations? Does the airport participate as a voting member or general attendee? Can the airport offer to make a presentation to one or more of these groups to begin a conversation? The “Notes” part of the checklist for this section can be used to list participation ideas that fit community and airport needs. CURRENT INITIATIVES? What are the community and the region currently doing to promote economic development?

Off-airport Considerations and revenue 225 DO The public participation strategy notes and other information gathered in the checklist can be used as a starting point for a conversation about what makes sense for the airport. If programs are currently in place, opportunities may exist for the airport to participate. If no specific initiatives are underway, the airport may have the opportunity to serve as an initial convener of interested parties to begin a community conversation. Airport participation strategy Notes Attendance or active membership on development boards, commissions, organizations? Presentations to these organizations? Other ideas to participate in the community and promote economic development?

226 Generating revenue from Commercial Development On or adjacent to airports SOUND BITE The current off-airport development produces revenue through a TIF district. 7.6 Public Finance Tools and Other Opportunities for Airport Revenue Generation KNOW ACRP Report 121: Innovative Revenue Strategies—An Airport Guide describes a broad range of tools and techniques that airport operators can use to improve revenue streams, recover costs, or achieve operational efficiencies. Chapter 5, “Airport Entrepreneurial Activity—Part II,” addresses airport participation in real estate development and natural resource development; however, because real estate development is only one of many topics covered in ACRP Report 121, it is addressed at a higher level than in this guidebook. Conversely, this section of ACRP Research Report 176 only briefly introduces a sample of public finance tools that are covered in greater detail in ACRP Report 121, Chapter 6, “Value Capture and Other Innovative Financing.” That chapter explores the history of value capture and its use in different modes of transportation, and suggests that untapped opportunities exist for airports to produce revenue through value capture strategies. These benefits can be tapped in the form of taxes or special assessments on the benefit itself, as opposed to a general obligation tax levy on the entire community. For additional information on value capture tools, the guidebook user is directed back to Chapter 6 of ACRP Report 121. The introduction to ACRP Report 121, Chapter 6, describes value capture techniques as follows: The strategy merits consideration as a way to finance airport improvements and recover improvement costs from beneficiaries of airport business and services. In this context, value capture applies to situations in which an airport sponsor is able to capture additional revenue as property values increase and/or commercial or industrial development take place because of proximity to the airport. Off-airport parking, rental cars, and hotels are examples of businesses that benefit directly by their proximity to an airport and candidates for value capture techniques. In addition to value capture techniques, ACRP Report 121 presents other ideas airports can use to generate revenue by selling services or access directly to tenants and passengers. In each case, the airport is identifying a market demand and positioning itself to collect revenue by meeting that demand. HAVE Guidebook users can use the checklist for this section to inventory programs that are already available as well as programs that are of interest for further investigation. The complete Public Finance Tools and Airport Revenue Generation Opportunities Checklist is provided in Appendix D, “Chapter 7 Checklists,” and a customizable copy of the same checklist can be downloaded from the ACRP Research Report 176 webpage. In this guidebook, the following public finance and value capture techniques are introduced only briefly in this “Have” section, using simple descriptions quoted directly from ACRP Report 121 (Kramer et al. 2015): TAX INCREMENT FINANCING (TIF)? “Within a designated geographic impact area (a district), bonds are issued to pay for infrastructure improvements that are expected to increase property values within the district, thus increasing property tax revenues. All increases in property taxes collected because of the

Off-airport Considerations and revenue 227 increase in value are set aside to pay the debt service on the bonds. In the case of an airport, a TIF for airport support or projects might be justified if the airport is essential to the activities and businesses in the defined district.” SPECIAL ASSESSMENT DISTRICT? “A ‘special assessment district’ is a value capture technique that imposes specific charges on property owners within a geographic area to cover the cost of an improvement of a facility with direct benefit to the property owners.” BUSINESS IMPROVEMENT DISTRICT (BID)? “A BID is a geographic area inside which property owners will benefit from capital improvements, maintenance activities, special services, and marketing. A BID is established when a majority of the property owners within the area vote to pay a fee to help cover the costs for these benefits. The most common applications of BIDs are downtown and commercial district Transportation Utility Fees.” TRANSFER OF DEVELOPMENT RIGHTS (TDR)? “The TDR provides a mechanism for landowners to retain existing rights to use their land, but if development is restricted, the development rights can be separated and sold to a TDR bank or to a developer and transferred to another site within a given jurisdiction.” CONNECTION FEES? “A connection fee is a one-time fee charged to a private landowner to allow a direct connection to a transportation infrastructure investment, utility line, or other facility. Airport sponsors can charge connection fees for access to airport provided utilities or Internet backbones. Furthermore, if security and TTF agreements are addressed, an airport sponsor can levy connection fees on tenants in adjacent industrial parks that request gates or access roads to the airport property.” LOCAL INCOME AND PAYROLL TAX? “Local income or payroll taxes include taxes on income (assessed on individuals) or payroll (assessed on businesses) within impact areas that benefit from a transportation investment. More than 20 states authorize the imposition of local income and payroll taxes including Oregon and New York.” SALES TAX/OCCUPANCY TAX? “States, counties, or municipalities can levy special sales taxes in an area that will benefit from a transportation facility (the impact area) to create financing specifically dedicated to that facility. A variation of this approach for airports could be a statewide or countywide hotel occupancy tax.” LAND VALUE TAX? “Land value taxes separate the value of the land itself from the value of any development (anything that may be built on the land). With regard to undeveloped land, conventional approaches to property tax will capture some of this differential in value, but a separate land value tax will reflect a greater portion of the value generated by development.” FOREIGN TRADE ZONE (FTZ)? “An FTZ is a designated geographic area within which merchandise is considered to be outside U.S. Customs territory, allowing businesses within the zone to defer or avoid normal tariffs and duties on imported materials and goods. FTZ designation is a common airport-related incentive. There are close to 300 FTZs throughout the country.” JOINT DEVELOPMENT? “Public private partnerships (P3s) involve partnerships between a public agency and a private developer to develop a site, usually on publicly-owned land, wherein project participants will both help pay for the costs of and share in the revenues generated by the development.”

228 Generating revenue from Commercial Development On or adjacent to airports ACCESS FEES AND PRIVILEGE FEES? “Most airports levy airport access fees and some privilege fees on off-airport users. Some airports choose to impose a per trip cost, which varies depending on the type of vehicle or the number of passengers the vehicle carries. However, airport sponsors are moving toward charging companies a percentage of gross revenues for airport access. As with other tools, access and privilege fees most often require local ordinances or state legislation.” SALE OF AIRPORT SERVICES? In ACRP Report 121, Chapter 4, “Airport Entrepreneurial Activity—Part I” explores the sale of airport-provided services and Chapter 7, “Improvements to Existing Airport Businesses” looks at ways to produce more revenue from existing services such as parking and concessions. Airport-provided services are delivered directly or indirectly to airport tenants and passengers by the airport for profit. Examples of these services are passenger processing for the airlines, above-the-wing and below-the-wing ground services, logistical support for concessionaires, and waste removal services for tenants. DO The information gathered in answering the questions in this section of ACRP Research Report 176 can be used as a starting point to determine if any strategy described in this section is already being used by the airport and/or whether it is already authorized by state legislation. Although Revenue generation opportunities Current practice? Permitted? Yes No Yes No Tax increment financing (TIF)? Special assessment district? Business improvement district (BID)? Transfer of development rights? Connection fees? Local income and payroll tax? Sales tax/occupancy tax? Land value tax? Foreign Trade Zone (FTZ)? Joint development? Sale of airport services? Access fees and privilege fees? these are innovative revenue strategies, it is important to keep in mind that they are tied to action by the local taxation authority, which means there is a political element to them. If enabling legislation is required from the state legislature, the political element is larger. Guidebook users are also encouraged to refer to the results of the section on community context in the Self-Assessment Toolkit (see Chapter 4) to consider whether a positive relationship has already been established with the community or whether this is an area that needs some additional work.

Off-airport Considerations and revenue 229 If these revenue strategies appear to have some potential for revenue generation, or simply for more information, guidebook users also can see ACRP Report 121: Innovative Revenue Strategies— An Airport Guide. Case Study: Skypark Airport, Bountiful, Utah Case Study: Pocatello Regional Airport, Pocatello, Idaho The Pocatello Development Authority in Pocatello, Idaho, operates a number of TIF Districts, including an urban renewal district at Pocatello Regional Airport, where TIF funds extend or improve infrastructure for businesses locating at the Pocatello Regional Airport Business Park. Planned projects include a new water tank, water and sewer upgrades, franchise utility upgrades, and road, curb, and gutter improvements. The TIF approach has also been used at Dayton-Wright Brothers Airport in Ohio, and for redevelopment of the former George Air Force Base into the Southern California Logistics Airport in Victorville, California. Skypark Airport has an innovative approach for providing stable and predictable long-term revenue streams. Skypark Airport is located within a larger industrial park that has both aviation and non-aviation enterprises. The individual land parcels within the industrial park have deed covenants and restrictions that require individual lot owners to contribute to the airport a proportional share of annual airport expenses according to a pre-set formula. This approach has been tested in the courts and upheld. All airports selling excess land parcels should consider including deed covenants and restrictions that require individual lot owners to make future financial contributions to the airport.

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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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