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Revolving Funds for Sustainability Projects at Airports (2019)

Chapter: Chapter 4 - Phase 2: Implementation GRF Activation Steps

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Suggested Citation:"Chapter 4 - Phase 2: Implementation GRF Activation Steps." National Academies of Sciences, Engineering, and Medicine. 2019. Revolving Funds for Sustainability Projects at Airports. Washington, DC: The National Academies Press. doi: 10.17226/25567.
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Suggested Citation:"Chapter 4 - Phase 2: Implementation GRF Activation Steps." National Academies of Sciences, Engineering, and Medicine. 2019. Revolving Funds for Sustainability Projects at Airports. Washington, DC: The National Academies Press. doi: 10.17226/25567.
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Suggested Citation:"Chapter 4 - Phase 2: Implementation GRF Activation Steps." National Academies of Sciences, Engineering, and Medicine. 2019. Revolving Funds for Sustainability Projects at Airports. Washington, DC: The National Academies Press. doi: 10.17226/25567.
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Suggested Citation:"Chapter 4 - Phase 2: Implementation GRF Activation Steps." National Academies of Sciences, Engineering, and Medicine. 2019. Revolving Funds for Sustainability Projects at Airports. Washington, DC: The National Academies Press. doi: 10.17226/25567.
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Suggested Citation:"Chapter 4 - Phase 2: Implementation GRF Activation Steps." National Academies of Sciences, Engineering, and Medicine. 2019. Revolving Funds for Sustainability Projects at Airports. Washington, DC: The National Academies Press. doi: 10.17226/25567.
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Suggested Citation:"Chapter 4 - Phase 2: Implementation GRF Activation Steps." National Academies of Sciences, Engineering, and Medicine. 2019. Revolving Funds for Sustainability Projects at Airports. Washington, DC: The National Academies Press. doi: 10.17226/25567.
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Suggested Citation:"Chapter 4 - Phase 2: Implementation GRF Activation Steps." National Academies of Sciences, Engineering, and Medicine. 2019. Revolving Funds for Sustainability Projects at Airports. Washington, DC: The National Academies Press. doi: 10.17226/25567.
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Suggested Citation:"Chapter 4 - Phase 2: Implementation GRF Activation Steps." National Academies of Sciences, Engineering, and Medicine. 2019. Revolving Funds for Sustainability Projects at Airports. Washington, DC: The National Academies Press. doi: 10.17226/25567.
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Suggested Citation:"Chapter 4 - Phase 2: Implementation GRF Activation Steps." National Academies of Sciences, Engineering, and Medicine. 2019. Revolving Funds for Sustainability Projects at Airports. Washington, DC: The National Academies Press. doi: 10.17226/25567.
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Suggested Citation:"Chapter 4 - Phase 2: Implementation GRF Activation Steps." National Academies of Sciences, Engineering, and Medicine. 2019. Revolving Funds for Sustainability Projects at Airports. Washington, DC: The National Academies Press. doi: 10.17226/25567.
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Suggested Citation:"Chapter 4 - Phase 2: Implementation GRF Activation Steps." National Academies of Sciences, Engineering, and Medicine. 2019. Revolving Funds for Sustainability Projects at Airports. Washington, DC: The National Academies Press. doi: 10.17226/25567.
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Suggested Citation:"Chapter 4 - Phase 2: Implementation GRF Activation Steps." National Academies of Sciences, Engineering, and Medicine. 2019. Revolving Funds for Sustainability Projects at Airports. Washington, DC: The National Academies Press. doi: 10.17226/25567.
×
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Suggested Citation:"Chapter 4 - Phase 2: Implementation GRF Activation Steps." National Academies of Sciences, Engineering, and Medicine. 2019. Revolving Funds for Sustainability Projects at Airports. Washington, DC: The National Academies Press. doi: 10.17226/25567.
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Below is the uncorrected machine-read text of this chapter, intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text of each book. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.

31 Once the overall structure of the GRF has been selected and key stakeholders are secured, the airport is ready to determine financial systems and begin investment. Chapter 4 provides infor- mation on the next three steps of implementation, highlighted in Figure 11: 4.1 Step 5: Secure Seed Capital 4.2 Step 6: Establish Fund Governance and Procedures 4.3 Step 7: Launch the Fund 4.1 Step 5: Secure Seed Capital 4.1.1 Introduction to GRF Funding Requirements The process of securing seed capital can range from a straightforward allocation of avail- able funding to a laborious multi-month process of consulting decision-makers. It is therefore advisable to begin this effort early. The size of the GRF and the amount of capital to be raised should match the airport goals for the potential projects. Step 3 is crucial to determining an appropriate size for the fund. A GRF needs two types of funding to operate successfully. The first is seed capital. Seed capital is the money that will be invested in airport projects. The second is operational capital. This is the funding that will cover the operating expenses of the fund itself. Many of the poten- tial funding sources discussed herein can be used to meet both needs, but some are only com- patible with one or the other. It is worth noting that many GRFs have minimal operational capital needs, because they are administered either part time or by existing staff without hiring new employees. 4.1.2 Potential GRF Funding Sources Seed and operational capital for a GRF can be obtained from a variety of sources. These examples constitute some of the potential funding sources available to airports for funding a GRF. They have been evaluated for ease of access, compatibility with GRF models, and scalability, and they have been arranged in three groups based on their likelihood to work for the majority C H A P T E R 4 Phase 2: Implementation— GRF Activation Steps

32 Revolving Funds for Sustainability Projects at Airports of the users of this report. A GRF is not limited to using a single source of capital, and airports can mix and match sources based on their individual circumstances. Tier 1 Options The funding sources in this group are the most universally compat- ible with the GRF models and easiest to access. Airports should consider these options first. Airport Revenue. Airports generate revenue through a variety of sources, typically broken down into airline (cost-recovery) revenue and nonairline (market-rate) revenue. Cost-recovery revenue comes from airlines for airport-provided services and shared services. Market-rate revenue is nonairline-related revenue from sources such as parking operations, car rental, concessions, advertising programs, and sponsor- ship opportunities. Both revenue sources could serve as potential seed or operational capital for a GRF. If an airport is federally obligated, federal law requires that airport revenue be used for airport-related purposes. (See the FAQ in Appendix A for additional details on the Airport Revenue FUNDING TYPE Internal COMPATIBLE AIRPORT TYPES All CAPITAL USES Seed and Operational Capital COMPATIBLE GRF MODELS Endowment or Savings Reclamation AVAILABILITY National EE/RE ALLOWED Yes Figure 11. Phase 2: Implementation—GRF activation steps.

Phase 2: Implementation—GRF Activation Steps 33 revenue use limitations within a GRF.) Airport lease structures may constrain the use of cost-recovery revenue for a GRF, as described in Section 3.1.3. Airports have more flexibility in setting prices for market-rate services, which may make this a more attractive option. Operating Budgets. Airport operating budgets are one of the most easily accessible funding sources for capitalizing and operating a GRF. Operating budgets can be used to fund a GRF through either a one-time endowment or a recurring budgetary line item. Because the savings associated with commonly funded sustainability projects, like EE/RE, typically accrue to the operating budget, using the operating budget to fund a GRF simplifies accounting and tracking. One way to fund a GRF without impacting the existing operating budget is to direct opera- tional savings—such as utility bill savings after the installation of LED lighting—that would have accrued as a budget surplus to a GRF instead. Airports can likely program operating funds via their budget proce- dures for a GRF, especially given that cost savings (from operational sources) are the funding mechanism. It is also suggested that airports consult with municipal budgeting staff to determine how GRFs could function within generally accepted accounting principles (GAAP), if applicable. Capital Budgets. Airport capital budgets are used to make long- term investments in buildings and equipment. The goals of the capi- tal budgeting process are well aligned with those of a GRF, especially where energy efficiency and sustainability considerations are already part of the existing capital budgeting process. Because a GRF revolves over time and reinvests its funding in additional projects, the creation of a GRF can take pressure off future capital budgets by funding projects that would have otherwise been paid for from the capital budget. Fund- ing contributions from capital budgets to a GRF can be structured as a one-time endowment or as a recurring budgetary line item. Similar to operating budgets, airports can likely program capital funds via their budget procedures for a GRF, especially given that cost savings (from operations) are the funding mechanism. It is also suggested that air- ports consult with municipal budgeting staff to determine how GRFs could function within GAAP, if applicable. Bonds. There are four basic types of bonds issued to fund airport capital improvements including (1) general obligation bonds sup- ported by the overall tax base of the issuing entity (the airport sponsor); (2) general airport revenue bonds (GARBs) secured by the revenues of the airport and other revenues as may be defined in the bond indenture; (3) bonds backed either solely by passenger facility charge (PFC) revenues or by PFC revenues and airport revenues generated by rentals, fees, and charges; and (4) special facility bonds backed solely Bonds FUNDING TYPE Debt COMPATIBLE AIRPORT TYPES All CAPITAL USES Seed Capital COMPATIBLE GRF MODELS Endowment (limited) Savings Reclamation AVAILABILITY National EE/RE ALLOWED Yes Capital Budgets FUNDING TYPE Internal COMPATIBLE AIRPORT TYPES All CAPITAL USES Seed and Operational Capital COMPATIBLE GRF MODELS Endowment or Savings Reclamation AVAILABILITY National EE/RE ALLOWED Yes Operating Budgets FUNDING TYPE Internal COMPATIBLE AIRPORT TYPES All CAPITAL USES Seed and Operational Capital COMPATIBLE GRF MODELS Endowment or Savings Reclamation AVAILABILITY National EE/RE ALLOWED Yes

34 Revolving Funds for Sustainability Projects at Airports by revenues from a specific facility. Bonds work well as a capital source for a GRF when paired with the savings-reclamation model but could also be used directly as seed capital for the GRF. If used to directly fund a GRF, interest rates charged by the GRF must exceed the interest rate of the bond, and internal GRF loan terms must not exceed bond terms, such that bond payments can be made from the pool of GRF repay- ments. A stand-alone bond issuance solely for the purpose of establish- ing a GRF is unlikely to be cost-effective, because there are relatively high fixed costs associated with a bond issuance. A better option would be a GRF carve-out on an already planned larger issuance. Using bonds to fund a GRF would impact debt load of an airport and, depending on the bond type, an airport’s credit rating may impact cost. State and Local Taxes on Aviation Fuel. State and local govern- ments have the ability to levy aviation fuel taxes. Most states, with the exception of Ohio and Texas, have existing aviation fuel taxes. Federal law requires that aviation fuel taxes be used for airport-related purposes, if airports are participating in the Airport Improvement Program (AIP). Allowable uses of fuel taxes include capital and operating costs, such as improvements to airport systems and facilities owned/operated by the airport. Levying new fuel taxes or raising existing fuel taxes can be politically challenging because of the impact that fuel taxes have on airline oper- ating costs, which makes re-allocating existing fuel tax proceeds a more attractive option. Tier 2 Options The funding sources in this group are also potential options, but may face some restrictions with respect to compatibility, ease of access, or availability. Airport Improvement Program Grants. The AIP is run by FAA under the U.S. DOT. Its broad objective is to help plan and develop a nationwide system of public-use airports that meets the current needs and the projected growth of civil aviation. AIP provides grants for a wide range of airport improvements including those that protect nat- ural resources, which encompass energy efficiency and sustain ability improvements. AIP grants are available nationally for all public-use air- ports in the NPIAS. Obtaining an AIP grant requires a grant application. AIP funding is typically available for projects in four categories: Primary Entitlement Funding, Cargo Airport Entitlement Funding, Non-Primary Entitlement Funding, and Discretionary Funding. • Primary Entitlement Funding is a subcategory of AIP apportioned to primary airports based on passenger traffic. • Cargo Airport Entitlement Funding is a subcategory of AIP appor- tioned to cargo service airports based on cargo aircraft landed weight. • Non-Primary Entitlement Funding is a subcategory of AIP specifi- cally for GA airports listed in the latest published NPIAS that show needed airfield development. Airport Improvement Program (AIP) Grants FUNDING TYPE Grant COMPATIBLE AIRPORT TYPES Public-use Airports in NPIAS CAPITAL USES Seed and Operational Capital COMPATIBLE GRF MODELS Savings Reclamation AVAILABILITY National EE/RE ALLOWED Yes State and Local Taxes on Aviation Fuel FUNDING TYPE Fee / Tax COMPATIBLE AIRPORT TYPES All CAPITAL USES Seed and Operational Capital COMPATIBLE GRF MODELS Endowment or Savings Reclamation AVAILABILITY 48 states. OH and TX excepted EE/RE ALLOWED Yes

Phase 2: Implementation—GRF Activation Steps 35 • Discretionary Funding is a subcategory of AIP consisting of the money remaining after FAA apportions funds into its major entitlement categories. Discretionary funding’s first priority is set-aside projects (airport noise and the Military Airport Program). After set-aside projects, funds are truly discretionary but distributed to projects that best carry out the purpose of the AIP, with highest priority given to safety, security, reconstruction, capacity, and standards. In addition to these four categories, there are also AIP environmental grants to enhance air quality at airports. The Voluntary Airport Low Emissions Program (VALE) grant pro- vides funding to cover the costs above routine replacement of equip- ment. Examples of eligible projects include upgraded boilers and gate electrification for aircraft. Zero Emission Vehicle (ZEV) grants offer airports a way to accelerate replacement of conventional internal combustion engine models with electric alternatives. Both types of grants could generate operational savings. While AIP grants cannot be used to directly fund a GRF (see FAQ in Appendix A), they could be used in conjunction with the savings recla- mation model. Under this structure an airport moves funding equal to achieved cost savings to the GRF, savings that have been made possible through an AIP funded project. Passenger Facility Charges. The PFC program allows airports to collect a charge for enplaned passengers using the airport. Airports use this revenue to fund FAA-approved projects that enhance safety, security, or capacity; reduce noise; or increase air carrier competition. More than $2.2 billion in PFC revenues are collected by airport opera- tors each year. PFC revenues are typically used on a “pay-as-you-go” basis, where PFC collections and interest earnings are spent directly on capital projects or leveraged (i.e., used to pay debt service on bonds or to repay other forms of debt). To be eligible for the PFC program, a commercial airport must be controlled by a public agency and enplane a minimum of 2,500 pas- sengers per year. Eligible agencies can apply to the FAA to collect PFCs up to $4.50 per enplaned passenger per flight segment. Air carriers collect PFCs specified by public agencies and remit those charges, less an FAA-specified handling fee, to the public agency for use on approved PFC-funded projects. While PFCs cannot be used to directly fund a GRF (see FAQ in Appen- dix A), they could be used in conjunction with the savings reclamation model as described in the AIP section. State Grants. Many states provide grants for airport capital improvement including EE/RE projects. Two resources airports can use to find state-specific opportunities include ACRP Synthesis 24: Strategies and Financing Opportunities for Airport Environmental State Grants FUNDING TYPE Grant COMPATIBLE AIRPORT TYPES Varies CAPITAL USES Seed and Operational Capital COMPATIBLE GRF MODELS Savings Reclamation and Possibly Endowment (Varies by State and Grant) AVAILABILITY State-by-State Basis EE/RE ALLOWED Yes Passenger Facility Charges (PFCs) FUNDING TYPE Fee COMPATIBLE AIRPORT TYPES Commercial Airports Controlled by a Public Agency with >2,500 Passengers per year CAPITAL USES Seed and Operational Capital COMPATIBLE GRF MODELS Savings Reclamation AVAILABILITY National EE/RE ALLOWED Yes

36 Revolving Funds for Sustainability Projects at Airports Programs (Molar 2011) (see the section on state funding opportunities) and the Database of State Incentives for Renewables & Efficiency (DSIRE) (n.d.). A grant-funded capital improve- ment project that results in operational savings would be a good match for a savings reclama- tion model. Some states may offer grants that could be used to directly fund a GRF. Tier 3 Options Tier 3 funding options are worth considering but may only generate modest amounts of revenue. Some of these more unconventional choices may be a solid fit for an airport, and others may not be applicable. Table 1 contains a summary matrix of choices. Carbon Charge. A carbon charge is a fee used to cover the cost of carbon mitigation proj- ects. A carbon charge could be used to fund a GRF, if the GRF prioritizes carbon mitigation. The Anti-Head Tax Act prohibits charging a fee on a per person basis (PFCs are an exception), so a carbon charge could only be negotiated on an air carrier basis. However, the current federal rates and charges policy prohibits airlines from paying for facilities until construction is complete, which limits the use of a charge for the endowment model. A carrier-based carbon charge used in conjunction with a savings reclamation approach could be a viable path. State Green Banks. A green bank is a public, quasi-public, or independent private institu- tion dedicated to financing the deployment of renewable energy, energy efficiency, and other clean energy and green infrastructure projects in partnership with private lenders. A number of states, including New York, Connecticut, California, Rhode Island, and Hawaii have green banks. Green banks could serve as a source of seed capital for project investment. Mission Driven Investments. Charitable foundations are increasingly deploying their capital through mission driven investments (MDIs) that seek to earn a modest financial return while driving change in the area of focus for the foundation. Foundations with a focus on sustainability, energy efficiency, and renewable energy deployment may be willing to consider making an MDI as seed capital for a GRF. Foundation Grants. Charitable foundations may also offer grants for sustainability, energy efficiency, and renewable energy deployment that could be used in conjunction with the savings reclamation model or the endowment model as seed capital for a GRF. Self-Sustaining Funding for Ongoing GRF Operations. Managing a GRF requires staff to help identify and review potential projects, track investment performance, process revolving funding, and oversee general operations. Some funds are structured as part of an existing office or department, and existing staff take on managing a GRF as part of their regular duties. It is possible that a large airport GRF may warrant dedicated staff. In most cases, there is at least some ongoing cost associated with administering a GRF that must be covered through annual budget allocations or by earnings from the GRF itself. There is also the possibility that projects may not perform as expected or that third parties may not fully repay the investment. To operate sustainably, a GRF must be able to replenish potential losses.

Phase 2: Implementation—GRF Activation Steps 37 Table 1. GRF funding options summary.

38 Revolving Funds for Sustainability Projects at Airports Finally, GRFs often aim to grow over time to enable increasingly large investments in the future. Growth can occur by procuring additional seed capital from outside sources, from ongoing budget allocations, or from earnings from the GRF itself. The following are three common mechanisms that operational GRFs employ to ensure a sustainable source of funding: GRF Fees. Many GRFs charge a small administrative fee for processing an application or as part of funding a project. GRF Interest. A GRF project investment can be structured as a loan with an interest rate and a regular monthly payment. Charging interest allows a GRF to cover operating costs poten- tial losses, and to grow the fund over time. In cases where seed capital has been borrowed (such as a bond issuance), a minimum amount of interest may be required to pay back the providers of the seed capital. GRF interest rates should be competitive or uptake will be low. Pay-It-Forward. Another method used to cover costs and grow a GRF is the pay-it-forward model. In this approach, projects are paid back over time through a series of set payments, often calculated to be equal to or slightly less than the monthly savings created by the project. These payments continue until the original investment amount has been repaid. At that point, the borrower makes a set number of additional payments that help grow the GRF. The number of these additional pay-it-forward payments is agreed upon with the borrower at the begin- ning of the process. 4.1.3 Choosing the Right GRF Funding Source There is no right answer to selecting a funding source for a GRF. Each GRF is unique and faces a unique set of opportunities and challenges. Ultimately, the best funding sources are those that are (1) compatible with the GRF design and airport structure, (2) accessible, and (3) have minimal (or at least manageable) impacts on other stakeholders. This section describes each of these criteria in more detail. It’s also important to note that GRFs are not limited to using a single source of funding. Some GRFs use one source for initial capitalization and another to support ongoing opera- tional expenses. Others find they need to “bootstrap” their way to success by starting with many small sources of capital to prove the concept before senior leadership is willing to make a larger investment. Whatever funding circumstances prove effective at a specific airport, flexibility and willingness to consider alternatives throughout the funding process will make the process run more smoothly (see Figure 12 for a visual summary of the options). Compatibility Size of Funding Source. In general, a larger fund is typically better than a smaller one, because it covers multiple capital needs at one time. Before searching for funding, determine how much the airport really needs. Assess the volume of projects that an airport could fund on an ongoing basis, the size of the typical investment, and how many projects the GRF management

Phase 2: Implementation—GRF Activation Steps 39 team could realistically review and fund on an annual basis. Also consider the average term of project repayment, because that determines the amount of money that will revolve to the fund each year to be reinvested in new projects. If seed capital requirements cannot be satisfied from a single funding source, consider multiple options. Repayment Requirements. Some potential capital sources—bond issuances, MDIs, or state green bank investments—come with repayment requirements. While these sources can be used as seed capital, they come with additional constraints. At a minimum, the interest rate and term of GRF investments must be managed to match the capital repayment requirements. If a 10-year term for GRF repayment is desired, but a potential capital source needs to be repaid in 5 years, look for other options or adjust the airport GRF goals. Airport Type. Some funding sources are restricted to certain airport types—passenger, cargo, GA, public, private, and so forth—or only available to airports that participate in certain federal programs, such as NPIAS. Figure 12. Airport revenue use for GRF capitalization.

40 Revolving Funds for Sustainability Projects at Airports GRF Model. The savings reclamation model of capitalizing a GRF is compatible with any funding source. If there are plans to follow the endowment model of capitalization, this will eliminate a number of potential funding sources (e.g., AIP and PFCs). Seed versus Operating Capital. The ultimate use of the funding source will also deter- mine which sources are compatible. Sources of capital that need to be repaid, such as bonds and MDIs, should be used only as seed capital. Ease of Access Approval Required and Acquisition Process. Internal sources of funding, such as revenue, operating budgets, and capital budgets, are often the easiest to acquire, because they require only internal authorization. For external sources, gauge the airport team’s ability to manage or coordinate the processes required to obtain funding. Grants require applications and often come with additional stipulations and reporting. Depending on the complexity of the applica- tion and availability of current staff, an airport may need to secure new personnel or leverage consultants. Bond issuances can be an involved process and may impact the credit rating and debt capacity of the airport. The use of PFCs and fuel taxes requires federal or state approval, respectively. Availability. Some funding sources are available in only certain states, during certain time- frames, or as one-time sources with fluctuating availability. These may be better suited for seed capital. Look for steady funding sources for ongoing operational capital. Familiarity. Some funding sources like internal budgets, bonds, AIP grants, and PFCs, are well established financing mechanisms in the air transportation industry. It may be easier to get internal buy-in around these funding sources, because they are well understood. However, for that same reason, they may also already be fully allocated to other projects. Explore new funding opportunities from unconventional sources, even if it may take more work to get support for their use. Stakeholder Impacts Another aspect of selecting a funding source is the potential impact it could have on various other stakeholders. As a general rule, the more stakeholders involved in the process, the more interests that need to be considered, and the harder it will likely be to secure funding. Consider the following stakeholder groups when reviewing potential funding sources: • Internal airport staff • Internal airport management • Air carriers—especially where lease and cost-recovery might be an issue or fees may impact competitiveness of the airport • New revenue sources potentially related to marketing or promotion • FAA • Existing bondholders (in the case of debt issuance) • State and local governments

Phase 2: Implementation—GRF Activation Steps 41 Lease Compatibility Deployment of a GRF in airport leased space requires coordination with tenants. Ideally, an airport discusses a potential GRF with an airline or concessionaire as part of the contract nego- tiation process. Tenants need advance notification and adequate education to understand how a GRF would function as part of a potential lease. The suggested time to introduce the GRF con- cept is as part of the agenda for the first contract negotiation session. Introducing the possibility early will provide time to educate stakeholders and decide on implementation steps. Modifying existing contracts to incorporate GRF provisions is not suggested, because of the challenge of educating stakeholders, securing their agreement, and refining the existing lease. Lease modifications require multiple months, or longer, to complete. If the rented space con- stitutes a major portion of the airport’s total space, or if a current contract still has significant time remaining (4+ years), these factors may influence an airport’s choice to initiate a contract modification. Airports considering a GRF for leased space should consider adding the action to the Master Plan, so that future changes are integrated into long-term decisions and preparation. Incentivizing tenants with a reasonable cost savings split, or decreased rental rate, is the easiest way to obtain agreement and motivate airlines and concessionaires to participate. Adequate utility submetering is essential for monitoring performance in an individual leased space. If measurement of a specific space is not possible, the airport needs to determine if the magnitude of potential savings warrants investment in new metering. In general, the cost to install metering should be at least less than the 1 year’s worth of utility cost savings achieved through a project. Airports will also need to negotiate with tenants over how measurement equipment costs will be covered by the parties. 4.2 Step 6: Establish Fund Governance and Procedures 4.2.1 Fund Oversight The set of stakeholders tapped to oversee a GRF is another key consideration that affects both the politics of the fund and its performance. There are three options for selecting proj- ects and managing the operations of a GRF (the details of management are described in Section 3.2.2): • Management committees (or teams) are the most commonly adopted leadership structure for GRFs. Such a committee may be formed from a pre-existing body, such as a sustainabil- ity working group, or may be formed specifically for the GRF. Affected stakeholder groups should be represented on the committee to maintain buy-in and contribute expertise. • Staff and resources from a relevant department may be used to oversee the fund—often the finance, operations and maintenance, or sustainability departments. • A dedicated manager may be appointed specifically to run the fund, or fund management may be added to the job responsibilities of a current administrator. Management by committee is often advantageous for several reasons. First, it leverages the unique breadth of expertise across the airport community. Second, it promotes engagement

42 Revolving Funds for Sustainability Projects at Airports and awareness of the fund. Third, it reduces the burden that falls on any one member of the committee. However, a smaller management team housed within a single department offers tighter control of financing and a more streamlined process for issuing loans. In some cases, these leadership structures have been combined, with different groups man- aging different aspects of the fund. For example, a sustainability leader may serve as the fund manager and coordinate the operations of the fund, with a committee (sometimes chaired by the fund manager) that selects airport projects and provides guidance. 4.2.2 Establishing a Charter The management of fund operations involves a broad array of duties. Official and publicly available GRF charters are suggested. This document should clearly explain how the fund oper- ates. Charters are often developed from a written proposal used to facilitate discussion during the funding design stage and may use much of the same language (see the example included in Appendix E). 4.2.3 Setting up Financial Structure All stakeholders should feel comfortable with the loan and repayment process. Before any project is undertaken, involved parties must understand the following: • Point of Contact. Who pays the project invoice, which account is used, and when will those funds be available. • Repayment Process. Which account will be used to make repayments over the course of the loan, how often those repayments occur, and the total of each repayment as well as the overall repayment obligation. • Accounting Requirements. How will these flows of money appear on the various depart- mental budgets and balance sheets (if multiple departments are involved). Establishing this internal accounting procedure is the point at which many GRF proposals stall or fail entirely, often because technical details are overlooked by fund proponents, or they encounter red tape. Be sure to begin engaging on this issue early in the process. Some airports might choose an independent account with its own ID number for a GRF, while others may simply make an agreement to acknowledge the savings of the GRF as annual budgets are dis- tributed (see Appendix D). Examine how external purchases are made at the specific airport and how funds are transferred internally; then, base GRF payment flows on these pre-existing channels. 4.3 Step 7: Launch the Fund When launching a GRF, it is useful to pre-plan the first round of funding. The insights from Step 3 will be useful to support advance planning. As projects are implemented, make sure to continue the planning process to address the next round of actions, fund management consid- erations, outreach activities, and leadership team meetings. Planning for the future is important

Phase 2: Implementation—GRF Activation Steps 43 to efficiently manage the fund and to ensure that its capital remains effectively invested. Advance preparation also demonstrates positive momentum to airport stakeholders. It is important to establish the GRF fund in a way that fits within the airport culture and administrative structure, specifically the following: • Formalize the GRF with a fund charter, bylaws, memorandum of understanding, formal project criteria, and any other necessary guiding documents. Be sure that all relevant stake- holders are aware of these documents. • Consider developing a website for the fund. This can provide a useful venue for informing the airport community about the fund, posting official fund documents, providing tools and resources for getting involved or proposing projects, and reporting on the fund’s prog- ress to the public. Finally, when the fund is launched and the first few cycles of investment are underway, there are a few key questions to be evaluated, found in Section 5.3.2, to ensure that the fund runs smoothly.

Next: Chapter 5 - Phase 3: Operations GRF Project Implementation and Ongoing Management »
Revolving Funds for Sustainability Projects at Airports Get This Book
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Airports continually balance demands to improve infrastructure within the realities of available budgets. Green revolving funds (GRFs) offer an alternative approach for investing in projects that generate operational savings. These funds work by tracking verified cost reductions from implemented actions, and then transferring those savings to a reserve that provides capital for future qualified projects such as energy system upgrades.

A number of universities have managed GRFs for over a decade. Municipalities are starting to adopt them as well. ACRP Research Report 203: Revolving Funds for Sustainability Projects at Airports includes several non-airport-related case examples that have managed GRFs and two airport-related case examples. Airports require a modified GRF approach because of financial structures, Federal Aviation Administration (FAA) regulatory requirements, airline agreements, and the wide range of tenant roles.

This ACRP report provides guidance to determine whether this innovative funding approach is suitable for a particular airport and instructions on how to deploy it. Airports that have the ability and determination to launch a GRF will gain a robust method for advancing their sustainability goals.

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