Legal Considerations in the Funding and Development of Intermodal Facilities at Airports (2018)

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10 (FTA).76 FTA then undertakes a national review pro- cess and makes awards of CIG grants on a national competitive basis. The FTA also participates in proj- ect supervision.77 3. State Infrastructure Banks Many state and local governments have estab- lished infrastructure banks as a vehicle for attract- ing private investment in local infrastructure development. Federal programs can also deposit federal funds directly into state infrastructure banks from highway, transit and rail programs.78 The State of Wisconsin and its Department of Transportation, for example, have established a State Infrastructure Bank (SIB) that can transfer federal funds directly to government entities and transit agencies. 79 V. FAA GUIDANCE ON FUNDING INTERMODAL FACILITIES AT AIRPORTS The FAA has published five documents that pro- vide guidance about the rules and regulations that the agency applies when it considers funding requests for intermodal facilities at airports. Each document is discussed in chronological order below. It is helpful to keep in mind that when the FAA first began considering the development and funding of intermodal facilities at airports it placed those requests in the same analytical framework as requests for funding for roads and water access at airports.80 As time went on and the agency accumu- lated more experience with requests for approval of funding for intermodal facilities, it has come to understand that there exist significant differences between road and rail development on airports and so it has reconsidered its position and proposed a different analytical approach for intermodal facilities.81 76 Federal Transit Authority available at https://www. transit.dot.gov/funding/grant-programs/capital- investments/how-apply. 77 Id.; FTA Fact Sheet: Fixed Guideway Capital Invest- ment Grants (New Starts), Section 5309 available at https//www.FTA.DOT.gov/documents/MAP_2/Factsheet. 78 See generally, Funding and Financing, supra note 66 at 23. 79 http://wisconsindot.gov/Pages/doing-bus/local-gov/ astnce-pgms/aid/sib.aspx. 80 E.g., AIP Handbook, supra note 35 at Ch. 3 and Appendix P. 81 2016 Notice, 81 Fed. Reg. 26611. programs are competitive and can be affected by changes in national transportation priorities. A brief introduction to several of these non-airport federal funding programs is provided below. 1. The Transportation Infrastructure Finance and Innovation Act The Transportation Infrastructure Finance and Innovation Act (TIFIA) was enacted in 1998 and provides financial support for projects backed by a revenue stream.71 TIFIA provides loans, loan guar- antees or lines of credit that must be repaid from a designated stream of project funds, such as user fees, tolls or specifically-dedicated tax revenue. USDOT, Projects financed by TIFIA, USDOT.gov/ TIFIA. Because TIFIA loans are repaid from an identifiable source, the leverage provided by this form of financing can be extraordinarily signifi- cant—DOT calculates that every $1 in TIFIA fund- ing provides $10 in credit assistance.72 Another source calculates TIFIA leverage at a higher rate— 14:1.73 TIFIA financing has been used for significant amounts of the total financing packages for several airport projects, including Chicago O’Hare, Miami, San Francisco, and Washington Dulles. 2. New Starts – Capital Investment Grants The FTA administers the Capital Investment Grant (CIG) Program74 for the development of new fixed-guideway public transit systems and the expan- sion of existing systems. There are four types of CIG programs: 1) New Starts applies to new or extensions of existing fixed guideway systems that cost at least $300 million and receive $100 million or more in CIG funding; 2) Small Starts applies to new fixed guide- way and bus systems that cost less than $300 million and receive less than $100 million in CIG funding; 3) Core Capacity applies to an extension of an existing fixed guideway system that expands capacity by 10% or more; and 4) Inter related Projects applies to the simultaneous development of two or more covered systems.75 A New Starts grant is initiated by an appli- cation with the Federal Transit Administration 71 23 U.S.C. § 601. 72 81 Fed. Reg. 13030-36 (March 11, 2016). 73 Kirk & Mallett, supra note 67 at 21. Another federal program, the Transportation Investment Generating Eco- nomic Recovery (TIGER) grant program can be used in conjunction with a TIFIA loan to pay subsidy and admin- istrative costs, available at www.transportation.gov/tiger/ about 74 49 U.S.C. § 5309. 75 Public Transportation Capital Investment Grant (New Starts) Program: Background and Issues for Con- gress at 1 available at http://www.everycrsreport.com/ reports/R44534.html.

11 airport visitors and employees.”91 In a reference to its earlier approval of the Bay Area Rapid Transit (BART) extension to San Francisco International Airport (SFO), the policy references the FAA’s previ- ous approval of the use of airport revenue for struc- tures and equipment related to an airport transit station and the connection to the nearest mass tran- sit line where the structures and equipment were 1) located entirely on airport property and 2) designed and intended exclusively for the use of airport pas- sengers.92 Indeed, the 1999 policy emphasizes the matter of the SFO BART station’s use exclusively by airport passengers because the structures and equipment “included design features to discourage use by through passengers.”93 The 1999 Notice shows the strict application of the revenue use pol- icy that ultimately forces airport access project design to conform to the requirements of the exclu- sive use rule. Commentators have criticized the inefficiency of the BART SFO spur design for this very reason, which is discussed in IV. B. B. FAA Order 5500.1 The FAA issued Order 5500.1—Passenger Facil- ity Charge on August 9, 2001. The 2001 Order is the first formal policy statement noticed by the FAA that specifically mentions the use of PFCs for the 91 Id. at 7718-19. 92 Id. at 7719. Unlike PFC funding rules, the revenue use policy does not exclude funding if a facility is not used exclusively by airport patrons. If airport use is less than exclusive, however, proration is required. Id. The revenue use policy also allows airports to make airport property available at less than fair market value for public transit terminals, rights-of-way, and related facilities. Id. at 7721. The FAA interprets the self-sustaining grant assurance to require that airports receive fair market value (to the extent practicable) for the use of non-aeronautical facili- ties and services. The FAA, however, recognizes that mak- ing airport property available at less than fair market value “can be a legitimate function of an airport propri- etor.” Id. Thus, for example, providing airport property for public park use may have the salutary effect of enhancing public acceptance of the airport and will not violate the self-sustaining grant assurance as long as it a) does not adversely affect airport operations, b) would not affect air- port revenue, c) does not preclude future airport use of the property and d) does not require airport revenue for capi- tal or operating costs. Similarly, the FAA will not consider the use of airport property at less than fair market value for public transit projects a violation of 49 U.S.C. § 47107(b) and the self-sustaining grant assurance if 1) the transit system is under public ownership and 2) the facili- ties are directly and substantially related to the air trans- portation of passengers or property. Id. 93 Id. at 7705. “Incidental” use of the SFO BART facili- ties by non-airport passengers, however, did not preclude the use of airport revenue to finance “100 percent of the otherwise eligible cost items.” A. 1999 Revenue Policy In 1999, the FAA issued a Policy and Procedure Concerning the Use of Airport Revenue.82 The policy restates the statutory requirement that airports83 must provide assurances that they will use airport revenue84 for the capital and operating costs of 1) the airport, 2) the local airport system; 3) other facil- ities owned or operated by the airport owner and directly and substantially related to the air trans- portation of passengers or property.85 The policy makes clear the distinction between the use of air- port revenue and PFCs and that PFCs are not regarded as airport revenue.86 The requirements regarding the use of PFCs are also more restrictive than those regarding the use of airport revenue; PFC collection and use must be approved by the FAA and may only be used to finance “allowable” costs of approved projects (the specific kinds of proj- ects are limited).87 In 1987, Congress limited the use of airport rev- enue for non-airport facilities to only those facilities substantially and directly related to air transporta- tion.88 In 1994, Congress added certain reporting requirements that airports make an annual account- ing to the FAA of their revenues and expenses. And, in 1999, the FAA issued its Policy and Procedures Regarding the Use of Airport Revenue.89 Neverthe- less, as the policy emphasizes, straying from the revenue use requirements can constitute revenue diversion and may be costly.90 Airport revenue may be used for “those portions of ground access projects that can be considered an airport capital project, or of that part of a local facil- ity that is owned or operated by the airport . . . and directly and substantially related to the air trans- portation of passengers or property, including use by 82 64 Fed. Reg. 7696, 7715 (Feb. 6, 1999). 83 This includes airport owners and operators; a usage that is continued throughout this digest. 84 Airport Revenue is defined very broadly to include almost all “fees, charges, rents or other payments received” by an airport. 64 Fed. Reg. at 7716. 85 Id. at 7716. To do otherwise constitutes the diversion of airport revenue. 49 U.S.C. § 47107(b)(1) and 47133. 86 Id. at 7718. 87 Id. 88 Airport and Airway Safety and Capacity Expansion Act of 1987 (Pub. L. No. 100-223). 89 Fed. Reg. 64 No. 30 at 7696-7723 (Feb. 16. 1999). 90 The FAA is required to develop an enforcement pro- gram for violations of its revenue use policies and, if viola- tions are found, to withhold approval of grant applica- tions, or applications to impose PFCs, to impose penalties up to $50,000, to recover three times the amount of the diverted revenue and to impose interest from the date of the diversion. 64 Fed. Reg. at 7697.

12 Regarding the Eligibility of Ground Access Trans- portation Projects for Funding Under the Passenger Facility Charge Program.99 With this notice the agency grew more expansive, detailed and disclosed its experience with some of the projects in which it had issued RODs and FADs. The agency restated its analytical preference for treating all airport ground access projects the same whether they be road, rail, or water.100 Although the 2004 Notice follows the rules contained in the 2001 Order, it provides sev- eral examples from the written materials (FADs, RODs, and letters of guidance) issued by the agency between 1999 and 2004.101 Ground access projects must 1) be eligible for AIP funding; 2) meet at least one PFC program objective; 3) be adequately justi- fied; and (if proposed at a PFC level higher then $3); 4) must satisfy (a) the AIP funding test and (if pro- posed at $4 or above); (b) the airside needs test. Each of these criteria is addressed in the next four sections. 1. AIP/PFC Eligibility102 The 2004 Notice continues to apply the same cri- teria for AIP and PFC eligibility for ground access projects.103 The 2004 Notice is somewhat vague on the matter, but it ultimately concludes that AIP eli- gibility for ground access projects is within the cat- egory related to the “movement of passengers, cargo and baggage.”104 It then goes on to state that the agency’s past decisions on eligibility have “relied” on a combination of 1) an opinion from the Office of General Counsel (finding rail service to an airport “eligible under the category of airport ‘entrance’ and service roads”) and 2) the agency’s own pronounce- ments in paragraphs 620a (“Access Roads”) and 622b (“Rail Service to Airports”) in “Change 1” to FAA Order 5100.38B.105 The Notice goes on to restate 99 69 Fed. Reg. 6366 (Aug.10, 2004) [hereinafter 2004 Notice]. 100 Id. at 6367. The 2004 Notice cites to an opinion of its General Counsel that rail projects are eligible under the AIP because they are included in the broad category of “entrance and service roads.” 101 By the time the 2004 Notice was issued the agency’s experience with intermodal facilities at airports had increased, but not significantly. By 2004 the agency had issued only two more FADs—one to Oakland (OAK) and one to Orlando (MCO). There was no other activity until the next FAD was issued in 2009 in response to a request by Phoenix (PHX). 102 By statute AIP eligibility rules apply to both AIP and PFC project eligibility. 49 U.S.C. § 4011(a)(3)(A). 103 2004 Notice, supra note 69 at 6367. 104 Id. Citing FAA Order 5100.38B (AIP Handbook, Jan. 8, 2004 and 49 U.S.C. § 47102(3)(1)). 105 Id. at 6367; The 2004 Notice states that this analysis of the AIP eligibility of airport rail projects was “estab- development of intermodal facilities at airports. Until 2001 the FAA had issued only Final Agency Decisions (FADs) or Records of Decisions (RODs) in response to requests for the use of PFCs for the development of intermodal facilities.94 In any case, prior to the 2001 Order the FAA had accumulated significant experience with the development of intermodal facilities on airports. Prior to the 2001 Order, the agency had issued FADs and RODs for intermodal facilities at JFK, EWR, STL and PDX. The agency had also participated in two appeals of its FADs in the JFK AirTrain matter. Despite this history, however, the 2001 Order is surprisingly brief. The 2001 Order analyzes intermodal facilities along with other airport ground access modes— roads and water—and mentions them by name only twice: both times in reference to the directive given to its regional and district offices that requests for PFC funding related to intermodal facilities should be brought immediately to the attention of head- quarters and that such matters would be resolved at that office.95 The 2001 Order analyzes all airport ground access projects (road, rail, water) according to the same set of criteria. Thus, a ground access project must 1) be eligible for AIP funding; 2) meet at least one of the PFC objectives;96 3) be for the exclusive use of airport patrons and employees; 4) be constructed on airport-owned land or right of way;97 and 5) be connected to the nearest public access facility or point of sufficient capacity.98 C. 2004 Notice of Policy The third statement of policy by the FAA regard- ing ground access facilities came in a Notice of Policy 94 In some cases the FAA or one of its regional or district offices has issued correspondence responding to questions or stating agency positions. This is particularly true in the case of airports requesting guidance regarding the use of airport revenue. Some of this correspondence, however, has also addressed issues regarding PFCs. 95 2001 Order at 54, 75 and Section 2, 5-6(b)(4). 96 In the context of airport ground access projects the 2001 Order helpfully suggests that most projects will most often satisfy the PFC requirements for the preservation or enhancement of capacity or the enhancement of competi- tion among airlines. 2001 Order at 55. 97 The JFK appeals clarified that the requirement for airport-owned land need not be taken literally. It is enough that the airport controls the land or right-of-way or, at some consequential point, comes to own or control it. 98 Based on experience (again with JFK) the agency was willing to inform readers that it would consider for funding more than one access point for the ground access facility if the airport could demonstrate a sufficient vol- ume of passenger traffic to justify a second connection. Order at 55.

13 (just as with the PFC objective test) a case may be made that increasing ground access capacity may increase competition among air carriers by increas- ing the airport’s catchment area and by decreasing travel time to the airport. The 2004 Notice identifies four factors the agency will consider in making its significant contribution determination. The most important factor (and the one relied on in almost every intermodal facility PFC request) is whether the intermodal facility does or will alleviate an important constraint on airport growth or service.112 4. Adequate Justification The 2004 Notice recognizes two methods for air- ports requesting PFC funds for intermodal facilities to demonstrate adequate justification, but the agency recognizes there may well be “additional paths.” In either case, however, the agency expects that, at the very least, an airport will demonstrate a “reasonable stream” of congestion relief when the issue is considered in the context of the scale and cost of the proposed intermodal project. In other words, as the cost and scale of the project increases, the agency expects the level of justification to increase as well.113 The 2004 Notice cites two exam- ples of methods of justification with which it has had experience—JFK and PDX. In the case of JFK’s request, the Port Authority was able to demonstrate that but for the construction of the JFK AirTrain, 3.5 million fewer passengers would be able to reach the airport each year within ten years due to conges- tion constraints.114 In the second case, PDX was able to demonstrate that the benefits of its MAX light rail system (LRS) (reduced travel times to the air- port and the reliability of the airport’s connection to the Max system network) were reasonable in the context of the cost of the project.115 The FAA required significantly more and better data for the $1.9 bil- lion JFK AirTrain project than it did for the $200 million SFO BART spur or the $90 million PDX Max extension. 5. Airport-Owned Land AIP eligibility, and thus PFC funding, require that intermodal projects must be located on airport- owned land or a right-of-way controlled by the air- port.116 This requirement posed a hurdle for the JFK AirTrain facility in 1999, so much so that it was the 112 The FAA views the inability of present or future pas- sengers to reach an airport as an important constraint. 113 2004 Notice, supra note 69 at 6370. 114 Id. at 6369-70. 115 Id. at 6370. 116 Id. at 6368. the three eligibility criteria contained in Paras. 620a and 622b of the AIP Handbook: 1) The facility106 (road or rail) may only extend to the nearest public facility of sufficient capacity to accommodate airport traffic; 2) the facility must be located on airport property or a right-of-way acquired by the airport; and 3) the facility must serve exclusively airport traffic.107 2. PFC Objective In addition to AIP eligibility, PFC requests for intermodal facility funding must satisfy at least one of the PFC Program objectives. PFC Program objec- tives include: 1) preserving or enhancing the safety, capacity, or security of the national air transporta- tion system; 2) reducing or mitigating noise result- ing from an airport, or 3) enhancing competition between or among air carriers.108 The 2004 Notice recognizes that requests for intermodal facility PFC funding typically satisfy the capacity objective because such facilities offer more reliable access times to airports, which the agency accepts as a “rough gauge” of capacity benefits.109 Airports have also been able to provide data that demonstrates a ground access constraint or to forecast that one will arise at some future date. The agency also appears willing to entertain a claim that improved ground access enhances competition among air carriers, but cautions that such claims must be “realistic and supported by analysis.”110 3. Significant Contribution Finding A request by a large or medium hub airport for a project at the $4 or higher PFC level is required to show that the facility makes a significant contribu- tion to: 1) improving air safety and security; 2) increasing air carrier competition; 3) reducing con- gestion (current or anticipated); or 4) reducing noise.111 Most often requests for funding identify congestion relief as a significant contribution, but lished through agency legal opinions.” 2004 Notice, supra note 69 at 6367. The legal opinions, however, remain unidentified. 106 The term “facility,” as used here, includes “roads.” 107 2004 Notice, supra note 69 at 6367. The 2004 Notice mentions two additional details: related facilities and ownership. “Related facilities” may include lighting, oper- ational equipment, informational technology and other electronic systems including signage. These “related” facilities are eligible when they are a “necessary part” of an eligible facility. The ownership requirement means that the airport must retain ownership, even though it may lease the facility or have someone else operate it. 108 Id. at 6368. 109 Id. at 6369. 110 Id. 111 Id. at 6368-69.

14 7. Miscellaneous PFC Funding Issues The 2004 Notice addresses several other issues that, while not controlling, nevertheless enter into the calculus of an airport intermodal project. First, the 2004 Notice addressed an issue raised by the Office of the Inspector General (OIG) of the United States Department of Transportation in an audit that cautioned the agency to verify that the funding of an intermodal project would not jeopardize an air- port’s investment plans for enhancing airside safety, security and capacity.124 While the agency stated that it would be concerned if critical airside needs went unfunded as a result of expenditures for a ground access project, the 2004 Notice recognizes that the FAA has no statutory or regulatory basis to assign priority to PFC projects proposed up to the $3 PFC level. Projects funded at the $4 PFC level and above, however, must meet the airside needs test which requires a demonstration that adequate pro- visions have been made to satisfy airside needs. Finally, the OIG also suggested that the FAA require airports to explain why airport intermodal projects could not be funded by other, non-airport revenue or funds.125 The OIG’s request seems to suggest that, prior to approving PFCs, the FAA should require airports to demonstrate that they have exhausted all other possible funding sources. The OIG, how- ever, did not cite (and the FAA could not locate) a regulatory or statutory basis for such a requirement. Moreover, the availability of such non-airport fund- ing does not reduce the requirement that an airport satisfy all of the elements necessary to support PFC funding.126 D. Bulletin No. 1 – 2006/2007 The FAA issued Bulletin No. 1 between 2006 and 2007 (Bulletin No. 1)127—the document was intended for use by the FAA’s regional divisions and its Air- port District Office staff who are instructed to coor- dinate all “substantial” surface access projects with the agency’s Airports Financial Assistance Division users, then the airport must make the station so deliber- ately unattractive to those users (by design features, rout- ing, pricing, etc.) that it discourages non-airport use. 2004 Notice, supra note 69 at 6368. The 2004 Notice cites to its FAD on the PDX MAX facility as an example of the “suc- cessful” application of this rule: The FAA permitted PFC funding for only one of three discrete segments (the on- airport station segment ending at the terminal) because it alone was solely intended for use exclusively by airport patrons and employees. Id. 124 Id. 125 Id. 126 Id. 127 The FAA was unable to provide a more exact publi- cation date for Bulletin No. 1. subject of appellate review of the agency’s FAD (see Air Transport Assn. of America v. FAA),117 and has caused some criticism for distorting the design of intermodal facilities at airports.118 If an airport will be using a right-of-way, it need not own the right-of- way prior to making its PFC request. Nonetheless, it must certify that it will take ownership of the property interest prior to use of the PFC funds.119 Finally, the right-of-way must be attached to the air- port (at some point) and run to the nearest public facility with sufficient capacity to accept airport pas- senger traffic.120 Airlines have argued that this rule distorts the requirement that an intermodal facility must be located on airport land and is ripe for abuse because it would allow, at least in theory, an airport to invest airport funds in significant off-airport development. There is, however, no evidence in the literature that this has taken place. 6. Exclusive Use Another AIP eligibility requirement that has caused substantially more discussion and contro- versy is the concept of “exclusive use.” The 2004 Notice explains that exclusive use requires an air- port to demonstrate that an intermodal facility will have no more than incidental use by non-airport passengers.121 This means to the FAA that, by design, routine use of the intermodal facility by non- airport users would be “unattractive” and that non- airport users would amount to a minor percentage of system ridership.122 This “design” requirement has been the subject of much criticism because it discourages the consideration of through-track sys- tems that may well be more economical to build and operate, as well as more attractive to a larger popu- lation of riders.123 The rule also could discourage the use of airport access stations by local residents. 117 169 F. 3d 1, 5 (CADC 1999). 118 phylliS orrick & kareN trapeNBerg frick, the uSe of paSSeNger facility chargeS aS a fuNdiNg Stream for SuStaiNaBle traNSport facilitieS at airportS (Transporta- tion Research Board, 2012). 119 In the case of the JFK AirTrain it was sufficient that the Port Authority demonstrated that there were no sig- nificant impediments to its obtaining the necessary prop- erty interests to complete the project. 169 F.3d at 5-6. 120 Once the right-of-way is held by and is “attached” to the airport, the FAA considers the land a part of the air- port. 2004 Notice supra note 69 at 6368 (citing 169 F.3d at 6). 121 Id. at 6368. 122 The JFK Jamaica Station, for example, was designed as a transfer point for airport passengers but was con- structed without access for neighborhood residents who might have used the facility. 123 The 2004 Notice suggests that if the intermodal facility is located in an area that may attract non-airport

15 cost of on-airport facilities used exclusively by airport patrons; 5) the use of airport revenue for an intermodal facility that is not for the exclusive use of air- port passengers is permitted but is limited by two rules: a) airport funds cannot be used for portions of the project that are not necessary to serve airport passengers, and b) airport funds must be prorated to actual airport use of the project; and 6) the incidental use by non-airport passengers of a project otherwise constructed for use ex- clusively by airport patrons does not require the proration of airport funding. It is worth noting that the proration identified in subparagraph (5) above derives from the FAA’s interpretation of the statutory language contained in 49 U.S.C. §§ 47107(b) and 47133 requiring that airport revenue may only be used to fund inter modal projects a) owned or operated by an airport and b) directly and substantially related to the air trans- portation of passengers or property.132 This more permissive standard allowing proration for the actual airport use of an intermodal facility, rather than the exclusive use of such a facility, is the pri- mary difference between the legal standard appli- cable to the use for airport intermodal projects of airport revenue on the one hand and AIP and PFC funds on the other. The FAA’s 2016 Notice of Pro- posed Policy Amendment, discussed in the following Section V. E., would change these rules and would allow the use of proration for intermodal projects funded with PFCs. The use of PFCs to fund inter- modal facilities only partly used by airport passen- gers is also discussed more fully in the Washington Dulles Metro Silver Line case study in Section VI. E. Finally, the Bulletin recommends airport staff par- ticipation in meetings with MPOs and the coordina- tion of airport access needs with surface transportation agencies and cites to then-current, generally unhelpful literature.133 E. Notice of Proposed Policy Amendment (May 3 and 10, 2016) On May 3, 2016 the FAA filed a Notice of Proposed Policy Amendment and Request for Comments: PFC Program: Eligibility of Ground Access Projects Meet- ing Certain Criteria.134 The 2016 Notice contains proposed changes to the 2004 Notice of Policy Regarding the Eligibility of Ground Access Trans- portation Projects for Funding Under the PFC 132 Bulletin No. 1 at 5-6. 133 Bulletin No. 1 at 6-7. 134 2016 Notice, supra note 55. in Washington, D.C. The Bulletin reviews the then- current AIP, PFC, and airport revenue policies applicable to airport ground access projects and pro- vides “general guidance” for the use of AIP, PFC, and airport revenue funds for such projects. The Bulletin is an interesting and less formal insight into the agency’s view of its policies. Issues concerning FAA policy regarding the PFC eligibility of ground access projects are referred, without discussion, to the 2004 Notice. The AIP dis- cussion is also brief: reference is made to the then- current AIP Handbook (FAA Order 5100.38C (Sept. 28, 2005), now FAA Order 5100.38D (Sept. 30, 2014)); reaffirms that, except for the significant con- tribution PFC test, the eligibility requirements for PFC and AIP projects are the same; and that on- airport projects that are not used exclusively by air- port patrons are not eligible for PFC and AIP funding. The Bulletin restates (albeit in less formal language than a Federal Register Notice) the follow- ing points regarding the use of airport revenue as a source of funding for ground access projects at airports: 1) ground access facilities that are integrated into an airport terminal complex may be con- sidered a capital project of the airport; 2) ground access projects that are not an airport capital cost are required to meet a two-part test: a) the project is a capital or operating cost of facilities owned128 or operated129 by the airport owner or operator and b) substantially and directly related to the air transportation of passengers130 for property;131 3) airport revenue may be used for the capital and operating costs of intermodal projects a) owned or operated by the airport and b) directly and substantially related to the air transportation of air passengers or property; 4) airport revenue may be used for the actual 128 According to the Bulletin, “owned” means that the airport holds title to the facilities for which the revenue is used. Bulletin at 4. 129 “Operated” means that the airport is a) legally responsible for the operation of the ground access facility and b) operates or contracts for the operation of the facil- ity. Bulletin at 4. 130 “Directly and substantially” means that the project is a) intended primarily for the use of airport patrons and is “projected” to be used by airport patrons. Bulletin at 4-5. 131 The airport revenue funding rule is different from the PFC use rule in that PFC funding does not allow for the proration of expenses and requires that the facility must be for the use exclusively of airport patrons. 69 Fed. Reg. 6368 (Feb.10, 2004). The difference is intended to prevent airports from diverting airport revenue for non- airport municipal uses.

16 than if it were constructed as a spur off the main line or an off-airport facility that required a shuttle system or APM transfer to an airport station. In this context the AIP eligibility requirement for “exclusive use” by airport patrons becomes problem- atic. The Dulles rail project did not contemplate use by non-airport passengers that was incidental; it was designed for use by airport and non-airport pas- sengers because it was cheaper and more efficient to situate the main line station at the airport in a con- figuration similar to that of the Washington, D.C. Metro station at National Airport.136 As a result, the undeniable utility of an intermodal system that accommodates more passengers at a lower cost falls within the statutory policy requiring the FAA to fos- ter the development of intermodal connections at airports. Moreover, denying PFC funding to effi- cient, convenient and cost-effective intermodal solu- tion could be viewed as inconsistent with the federal statutory policy encouraging the development and use of intermodal facilities discussed earlier. Faced with this circumstance the agency determined that the analytical connection that it had established between roads and rails for determining PFC eligi- bility was no longer helpful. There are, the agency discovered, fundamental differences between roads and rails—roads allow users to choose their own path to an airport, or to bypass the airport alto- gether, while rail users have no such choices and must travel through an airport because that is the route that the rails take. Rail and road projects are also planned, funded, constructed and operated dif- ferently. These processes tend to limit choices for rail users but expand the range of choices for road users. Thus, the agency concluded, while strict exclusive use requirements were necessary to curb potential abuse in the development of airport road- ways, a more flexible approach was required for rail in order to satisfy the statutory command that the agency foster intermodal development at airports. The FAA, therefore, proposed three potential tests for eligibility for PFC funding of intermodal projects that travel through, rather than terminate at, an airport. First, airports would be allowed to use PFC fund- ing as airport revenue is currently used for inter- modal systems—by applying a pro-rata formula to 136 The exclusive use concept has strong policy under- pinnings. The idea is that airport “patrons”—passengers, employees and tenants—should not be responsible for underwriting and funding transit systems that have no connection to the airport. But the FAA has long agreed that airport users may be charged with the costs of transit to the “extent necessary” to meet their needs as airport patrons. So PFC funding is available for that portion of the cost attributable to airport patrons. Program and represents a significant change in the agency’s consideration of intermodal facilities at air- ports. First, the agency reconsiders, for a number of reasons, the “exclusivity” requirement for AIP eligi- bility. Second, the agency attempted to apply the AIP criteria for project eligibility in the context of the statutory policy command that it “encourage the development of intermodal connections on airport property between aeronautical and other transpor- tation modes and systems to serve air transporta- tion passengers and cargo efficiently and effectively and promote economic development.”135 As a conse- quence, the 2016 Notice reconsiders the fundamen- tal analytical connection between roads and rails that underlies the 2004 Notice. Finally, the 2016 Notice proposes three separate paths to PFC fund- ing for intermodal projects at airports and suggests that it may be amenable to additional, equally con- vincing paths proposed by airports themselves. Prior to the 2016 Notice, the Congressional policy supporting the development of intermodal facilities generally, and at airports in particular, was well established. As discussed earlier, Congress began setting intermodal policies in 1991 with ISTEA. That statute recognized that intermodalism held value as an overarching goal in the development of the national transportation system. Similar, but stronger, policy pronouncements were made in 1998 in TEA-21. Funding followed and additional policy statements made in the AIR21 became directly applicable to airports. During all of this time the FAA continued to regard intermodal projects in the same analytical framework as roads and water access to airports. This was a consistent position for the agency to take because all of the rail projects seeking PFC funding prior to 2004 were proposed and constructed on air- port land or airport rights-of-way. The only intermo- dal project proposed and constructed as a line that went through an airport (the Metro light rail system at the Minneapolis Saint Paul Airport (MSP)) did not request PFC funding, but instead used airport revenue. Thus, not until a 2014 request by the Met- ropolitan Washington Airports Authority (MWAA) for PFC funding for a through-track system at the Dulles Airport (IAD) was the issue placed squarely before the agency for decision. MWAA presented an intermodal project that would likely carry a very significant number of airport passengers a very long distance to an airport facing ground access con- straints in the next ten years that could be built more cost effectively, operated more efficiently and with greater convenience to all passengers if the rail line continued as a through-track system rather 135 49 U.S.C. § 47101(a)(5).

17 further by suggesting that airports should have the prerogative to propose a new methodology, if it chose to do so.144 Comments by airlines and their trade organiza- tions opposed the relaxation of the exclusivity requirement and feared most that airport revenue would be more easily diverted to fund regional tran- sit projects that had little or no relationship to air- port users.145 Airlines for America (A4A), nevertheless, agreed with the observation made in the 2016 Notice that there exist fundamental differ- ences between roads and rails that support the agency treating them differently.146 A4A argued, however, that the 2016 Notice ought to make clear that any relaxation of the exclusivity requirement for rails would not apply to roadways. Perhaps more significantly, though, A4A urged the FAA to place some restriction on an airport’s ability to obtain funding for intermodal facilities constructed on recently acquired airport property or airport rights- of-way acquired in anticipation of the construction147 of the intermodal facility or related track.148 A4A viewed such acquisitions as an “attempt to subvert PFC funding eligibility requirements.”149 Such a sweeping rule could have a significant impact on the design of intermodal systems and, also, could likely make them more expensive, less efficient and, per- haps purposefully, less attractive. While conceding that intermodal connections at airports can improve the efficiency of the systems they link and, therefore, contribute to the overall efficiency of the broader transportation system, Delta Airlines nevertheless expressed its opposition to any change to the existing FAA standards.150 In Delta’s view, Congress’ “user-based” approach to aviation funding requires that airport revenue “should be dedicated to projects that are directly and substantially related to aviation.” Citing the Dulles MWAA intermodal project, Delta saw a dan- ger that relaxing PFC funding requirements for intermodal facilities would eventually “crowd-out” 144 Id. 145 Comments to FAA 2016 Notice at 3-4. 146 Id. at 4. 147 It is difficult to conceive of a property interest or right-of-way acquired in conjunction with on the construc- tion of an intermodal facility that would not have been acquired “in anticipation of construction.” 148 Comments to FAA 2016 Notice at 4. 149 Id. at 6. Current standards and the 2016 Notice require airport intermodal facilities to connect to the nearest “facility of sufficient capacity.” A4A also feared that, because this term remains undefined, airports may seek extensive rights-of-way in order to stretch PFC fund- ing for off-airport intermodal components. 150 Id. at 3. the total cost of the intermodal facility according to airport use.137 Second, using the “incremental cost comparison” method, an airport may compare the cost of a system that bypasses the airport with the cost of a system that deviates from the bypass in order to serve the airport. The amount of allowable PFC funding under this method is the “incremental cost” of constructing a station and related facilities that deviate in order to serve airport passengers.138 The third method uses a “separate system” compari- son that requires a comparison of the cost of a through-track system and the cost of a stand-alone APM used to transport airport passengers from an off-airport station. Under this method the PFC funding for the cost of construction of the facility to serve airport passengers would be available if that cost were less than the construction costs of the sep- arate APM system.139 In either case, only those facil- ities located on airport property would be eligible for PFC funding. The FAA received significant public comment in response to the 2016 Notice. MWAA, understand- ably, supported the 2016 Notice, but favored changes that would address revenue diversion concerns by ensuring that funding for airport intermodal facili- ties is “no greater than what is necessary to meet the needs of airport passengers and employees.”140 MWAA proposed a test that allows PFC funding to extend only to “project components that directly and significantly benefit airport users.”141 Airport Council International (ACI), an associa- tion representing airports, agreed that the exclusiv- ity rule for PFC funding should be relaxed and that the agency should maintain a rule that prevented the “siphoning” of airport revenue to pay a dispro- portionate share of the costs of transit projects that serve both on and off-airport passengers.142 In ACI’s view, PFC funding should only be available for on- airport portions of a transit system and only to the extent the costs are attributable to use by airport passengers.143 Finally, ACI approved of all three of the PFC funding tests proposed by the FAA but went 137 81 Fed. Reg. at 26615. 138 Id. at 26612-13. 139 Id. at 26615. 140 Comments to FAA 2016 Notice: Docket No. FAA- 2016-6596 (81 Fed. Reg. 26611, May 3, 2016) at 3. 141 Id. 142 https//www.FAA.gov. Comments to FAA 2016 Notice at 2 accessed at https://www.regulations.gov/ docket?D=FAA-2016-6596. 143 Id. at 4. ACI also favored the retention of the eligibil- ity requirements (such as preserving or enhancing capac- ity, demonstrating adequate justification, and prohibiting the direction of the use of the funds by any entity other than the airport sponsor).