Airport Improvement Program: Issues for Congress
Congressional research reportApr 25, 2008
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Order Code RL33891
Airport Improvement Program:
Issues for Congress
Updated April 25, 2008
Robert S. Kirk
Specialist in Transportation Policy
Resources, Science, and Industry Division
Airport Improvement Program: Issues for Congress
Summary
The Airport Improvement Program (AIP) has been providing federal grants for
airport development and planning since the passage of the Airport and Airway
Improvement Act of 1982 (P.L. 97-248). AIP funding is usually spent on projects
that support aircraft operations such as runways, taxiways, aprons, noise abatement,
land purchase, and safety or emergency equipment. The funds obligated for the AIP
are drawn from the Airport and Airway Trust Fund (hereafter referred to as the trust
fund), which is supported by a variety of user fees and fuel taxes. The AIP is one of
five major sources of airport capital development funding. The other sources are taxexempt bonds, passenger facility charges (PFCs: a local tax levied on each boarding
passenger), state and local grants, and airport operating revenue. Different airports
use different combinations of these sources depending on the individual airport’s
financial situation and the type of project being considered. Small airports are more
dependent on AIP grants than large or medium-sized airports. The larger airports,
whose projects tend to be much more costly, are more likely to participate in the taxexempt bond market or finance capital development projects with a PFC.
The multi-year authorization of the AIP under Vision 100 — Century of
Aviation Reauthorization Act (P.L. 108-176) ended on September 30, 2007. A series
of short-term extensions authorized and provided funding for AIP, most recently
through June 30, 2008 (P.L 110-190). The program was in abeyance from January
1, 2008, until the enactment of P.L. 110-190 on February 28, 2008. During this
period, new grants could not be awarded but FAA could honor payment requests for
existing grants. The AIP and PFC issues that have been considered during the
ongoing debate regarding the reauthorization of the Federal Aviation Administration
(FAA) include the national level of need for airport development and the appropriate
AIP funding level; the appropriate federal role in airport development; the criteria for
the distribution of funding across airports of different types and sizes; the sufficiency
of AIP discretionary funding, especially for major capacity enhancing projects;
accommodating new system users such as the Airbus A380 super-jumbo jet and very
light jets (VLJs); airport privatization; defederalization of large airports; raising or
eliminating the $4.50 ceiling now imposed on PFCs; the use and tax treatment of
airport bonds; and noise mitigation funding and eligibility.
During the FAA reauthorization debate, virtually all of the policy issues and
options concerning AIP will be influenced by the broader budget issues of the
adequacy of trust fund revenues and the availability of money for the FAA from the
Treasury general fund. Should ample revenues be available, the reauthorization of
AIP could maintain the program’s structure and perhaps even increase AIP spending.
A constrained-budget scenario would probably increase interest in such issues as
defederalization or a tightening of program formula funding and eligibility criteria,
which could provide cost savings. It could also increase interest in raising or
eliminating the PFC ceiling, which could help airports fund more projects. This
report is not the CRS tracking report for FAA reauthorization. To track proposed
FAA reauthorization legislation, see CRS Report RL33920, Federal Aviation
Administration Reauthorization: An Overview of Selected Provisions in Proposed
Legislation, coordinated by Bart Elias.
Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Background and Selected Legislative History . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Airport and Airway Development and Revenue Acts of 1970
(P.L. 91-258) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Airport and Airway Improvement Act of 1982
(P.L. 97-248; the 1982 Act) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
The Wendell H. Ford Aviation Investment and Reform Act
for the 21st Century of 2000 (AIR21, P.L. 106-181) . . . . . . . . . . . . . . . 5
Vision 100: Century of Aviation Reauthorization Act of 2003
(P.L. 108-176; H.Rept. 108-334) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Sources of Project Funding for Airports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Airport Improvement Program (AIP) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
The Airport and Airway Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
AIP Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
AIP Funding Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Formula and Discretionary Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
State Block Grant Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
The Federal Share of AIP Matching Funds . . . . . . . . . . . . . . . . . . . . . 17
Distribution of AIP Grants by Airport Size . . . . . . . . . . . . . . . . . . . . . 18
What the Money is Spent On . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Letters of Intent (LOI) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Voluntary Airport Low Emissions (VALE) Grants . . . . . . . . . . . . . . . 21
AIP Grant Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Passenger Facility Charges (PFCs) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
AIP Funding of Airport Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Congressional Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Airport Capital Needs Assessments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Views of the Adequacy of Funding Availability . . . . . . . . . . . . . . . . 28
Airport Capacity Needs at the 35 Busiest Airports . . . . . . . . . . . . . . . 29
Caveats . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
AIP’s Financial Future Under an Uncertain Budgetary Outlook . . . . . . . . . 31
AIP Spending “Guarantees” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Current Law: Point-of-Order Enforced Spending Guarantees . . . . . . . 32
Spending Guarantee Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Partial Defederalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Privatization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Apportionment and Eligibility Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Federal Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Discretionary Fund Set-Asides . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Minimum Discretionary Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Grant Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Noise Mitigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Very Light Jets (VLJs) and the Airbus A380: Impact on AIP . . . . . . . . . . . 38
“Place Naming” in Annual Appropriations Legislation . . . . . . . . . . . . . . . . 39
Passenger Facility Charge Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Airport Bonding Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Alternative Minimum Tax (AMT) Issues . . . . . . . . . . . . . . . . . . . . . . 42
Appendix A. Legislative History of Federal Grants-in-Aid to Airports . . . . . . . 43
Airport and Airway Development and Revenue Acts of 1970
(P.L. 91-258; the 1970 Acts) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Airport and Airway Development and Revenue Acts Amendments
of 1971 (P.L. 92-174; the 1971 Amendments Act) . . . . . . . . . . . . . . . 44
Airport and Airway Development Amendments Act of 1976
(P.L. 94-353; the 1976 Act) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Airport and Airway Improvement Act of 1982
(P.L. 97-248; the 1982 Act) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Federal Aviation Reauthorization Act of 1996
(P.L. 104-264) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
The Wendell H. Ford Aviation Investment and Reform Act
for the 21st Century of 2000 (AIR21, P.L. 106-181) . . . . . . . . . . . . . . 46
Vision 100: Century of Aviation Reauthorization Act of 2003
(P.L. 108-176; H.Rept. 108-334) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Appendix B. Airport Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Commercial Service Airports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Primary Airports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Large Hub Airports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Medium Hub Airports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Small Hub Airports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Non-hub Primary Airports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Non-Primary Commercial Service Airports . . . . . . . . . . . . . . . . . . . . 48
Other Airports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Cargo Service Airports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Reliever Airports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
General Aviation Airports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
List of Figures
Figure 1. AIP Authorizations and Amounts Made Available for AIP,
FY1982-FY2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Figure 2. Distribution Entitlement and Discretionary
Grants for 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Figure 3. FY2006 % Value of AIP Grant Distribution
by Airport Size . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Figure 4. AIP Grants Awarded, by Type,
FY1992-FY2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
List of Tables
Table 1. Annual AIP Authorizations and Amounts
Made Available, FY1992-FY2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Table 2. Distribution of PFC Approvals and AIP Grants
by Project Type, FY1992-FY2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Airport Improvement Program:
Issues for Congress
Introduction
The Airport Improvement Program (AIP) provides federal grants to airports for
airport development and planning. The airports participating in the AIP range from
very large publicly-owned commercial primary airports to small public use general
aviation airports that may be privately-owned.1 AIP funding is usually limited to
construction or improvements related to aircraft operations, typically for planning
and construction of projects such as runways, taxiways, aprons, noise abatement, land
purchase, and safety, emergency or snow removal equipment. Commercial revenue
producing portions of terminals (such as shop concessions or commercial
maintenance hangars), automobile parking garages, and road construction outside the
airport boundry, are examples of improvements that generally are not eligible for AIP
funding. Airports smaller than medium hub, however, have broader eligibility on
terminal projects under certain conditions.2 AIP money cannot be used for an
airport’s operational expenses.3
The passenger facility charge (PFC) is a local tax imposed, with federal
approval, by an airport on each boarding passenger. The spending of PFC program
revenues is meant to complement AIP grants. PFC funds can be used for a broader
range of projects than AIP grants and are more likely to be used for “landside”
projects such as passenger terminal and ground access improvements that are
1
General aviation airports do not serve military (with a few Air National Guard exceptions)
or scheduled commercial service aircraft but typically do support one or more of the
following: business/corporate, personal, instructional flying; agricultural spraying; air
ambulances; on-demand air-taxies; charter aircraft. See Appendix B, at the end of this
report for airport definitions.
2
Primary commercial airports are categorized by the percentage of the total national
passenger boardings (enplanements) that occur at the individual airport during a year: large
hub airports enplane at least 1% of the national total; medium hub airports enplane at least
0.25% but less than 1%; small hub airports enplane 0.05% but less than 0.25%; and nonhub
airports enplane more than 10,000 passengers but less than 0.05% of total national
enplanements. Large and medium hub airports accounted for almost 89% of all
enplanements in 2005. See Appendix B at the end of this report for more detail.
3
For AIP eligibility criteria and prohibitions, see FAA, AIP Handbook, chapter 3, at
[http://www.faa.gov/airports_airtraffic/airports/resources/publications/orders/media/aip_
5100_38c.pdf]. Generally, all work items must be located within the airport boundary.
Exceptions, however, include such items as removal of obstructions, relocation of roads and
utilities to allow for eligible airport development projects, some environmental mitigation
work, and noise program projects.
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generally not eligible for AIP funding .4 PFCs can also be used for bond repayments
and in some cases to provide the local match for AIP projects.
This report discusses the Airport Improvement Program and its complement, the
PFC, within the broader context of airport capital development finance.5 After a brief
history of federal support for airport construction and improvement, the report
describes AIP funding, its source of revenues, funding distribution, and the types of
projects the program funds. This is followed by a review of AIP legislative and
policy issues that are being considered in the course of the Federal Aviation
Administration (FAA) reauthorization debate of the 110th Congress.6
The multi-year authorization of the AIP under Vision 100 — Century of
Aviation Reauthorization Act (P.L. 108-176) ended on September 30, 2007. A series
of short-term extensions authorized and provided funding for AIP, most recently
through June 30, 2008 (P.L 110-190). The program was in abeyance from January
1, 2008, until the enactment of P.L. 110-190 on February 28, 2008. During this
period, new grants could not be awarded but FAA could honor payment requests for
existing grants.
This report is not the CRS tracking report for FAA reauthorization. For an
overview of proposed FAA reauthorization legislation, see CRS Report RL33920,
Federal Aviation Administration Reauthorization: An Overview of Selected
Provisions in Proposed Legislation, coordinated by Bart Elias.
AIP spending is supported by funding from the Airport and Airway Trust Fund
(hereafter referred to as the trust fund). The aviation user fees and taxes that support
the trust fund had been authorized through September 30, 2007, in this case under
provisions of the Taxpayer Relief Act of 1997 (P.L. 105-34). P.L. 110-190, discussed
above, also extended the taxes that support the trust fund and the trust fund’s
expenditure authority through June 30, 2008.
4
The terms airside and landside are terms of art often used in discussions of airport
development and planning. Although their meanings may vary depending on the user and
context, airside generally refers to parts of an airport that directly involve the arrival and
departure of aircraft (i.e. runway, taxiway, and ramp areas, etc.), landside generally refers
to other areas of the airport (i.e. buildings such as terminals, hangars, firehouses and other
facilities and infrastructure such as fuel farms, roads, perimeter facilities, etc.). Although
most would describe AIP as primarily an airside program, its eligibility criteria allow for
some projects that are landside as well as for noise and environmental mitigation projects,
which do not fit neatly into the airside/landside distinction.
5
For an overview of how airports fund their operating expenses and the sources of funding
commonly used to pay for airport capital development, see CRS Report 98-579, Airport
Finance: A Brief Overview, by Robert S. Kirk.
6
For a broad discussion of FAA reauthorization that goes beyond AIP reauthorization
issues, see CRS Report RL33698, Reauthorization of the Federal Aviation Administration:
Background and Issues for Congress, coordinated by Bart Elias.
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Background and Selected Legislative History7
Prior to World War II the federal government limited its role in aviation to
maintaining the airway system, viewing airports as a local responsibility. Some
federal monies were spent on airports during the 1930s (about $150 million) but only
as part of federal work relief activities such as Works Progress Administration
(WPA) projects. The national defense need for a strong system of airports during
World War II led to the first major federal support for airport construction. After the
war, the Federal Airport Act of 1946 (P.L. 79-377; the 1946 Act) continued federal
aid under the Federal Aid to Airports Program, although at lower levels than during
the war years. Under the 1946 Act, funds were appropriated annually from the
general fund of the U.S. Treasury. Initially much of this spending supported a policy
of conversion of military airports to civilian use. In the 1960s substantial funding
also was used to upgrade and extend runways for use by commercial jets.8 Increasing
congestion during the 1960s, both in the air and on the ground at U.S. airports, was
seen as evidence by some that past federal support for airports had not been sufficient
to maintain adequate airport capacity.9
Airport and Airway Development and Revenue Acts
of 1970 (P.L. 91-258)
In 1970, Congress responded to the congestion problems and capacity concerns
at airports by passing two acts. The first, the Airport and Airway Development Act,
dealt with the spending side of federal aid to airports. It established the forerunner
programs of AIP — the Airport Development Aid Program (ADAP) and the Planning
Grant Program (PGP) — and set forth the programs’ grant criteria, distribution
guidelines, and authorization of grant-in-aid funding for the first five years of the
program.10 The second Act, the Airport and Airway Revenue Act of 1970, dealt with
the revenue side of airport development. This act established the Airport and Airway
Trust Fund (AATF, also referred to as the Aviation Trust Fund, and in this report,
simply the trust fund). Revenues from levies on aviation users and fuel were
dedicated to the fund.11 Since enactment of the 1970 Act, the trust fund has been the
principal source of federal aid to airports (first under ADAP and then under the AIP
starting in FY1982).
7
This is a summary of a more detailed legislative history of federal grants-in-aid to airports
provided in Appendix A, at the end of this report.
8
For a general discussion of the U.S. airport system see Alexander R. Wells, Airport
Planning & Management, (New York, TAB Books, 1992), 1-76.
9
U.S. President (1969-1974: Nixon), Problems of Air Transportation in America: Message
from the President of the United States, 91st Cong. 1st Sess., June 1969, (Washington, U.S.
Govt. Print. Off. , 1969), H.Doc. 91-130.
10
Grants-in-aid to airports refer to the giving of federal money (that does not have to be
repaid) to an airport sponsor, such as an airport authority, to subsidize an FAA approved
airport project.
11
See CRS Report RS21321, Aviation Taxes and Fees: Major Issues, by John W. Fischer.
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In 1976, the Airport and Airway Development Amendments Act of 1976 (P.L.
94-353), responding to concerns over the amounts made available in appropriations
bills for ADAP, included “cap and penalty” provisions which placed an annual cap
on spending for costs of air navigation systems and a penalty that reduced these caps
if airport grants were not funded each year at the airport program’s authorized
levels.12 Some form of cap and penalty mechanisms were in effect until FY1998.
ADAP grants totaled about $4.1 billion from 1971 through 1980. In part
because of a debate over proposed “defederalization” provisions, Congress did not
pass authorizing legislation for the taxes that supported the trust fund or for the
fund’s operation during FY1981 and FY1982, which meant that the Aviation Trust
Fund lapsed during those two years, although spending for airport grants continued.13
Airport and Airway Improvement Act of 1982
(P.L. 97-248; the 1982 Act)
The 1982 Act created the current AIP and reactivated the trust fund. Although
the AIP maintained the ADAP’s approach of using grants-in-aid (as opposed to
providing loans) to support an integrated national system of airports, it did make
some significant changes in the operation of the program. The program differences
included altering the funding distribution among the newly defined categories of
airports and extending aid eligibility to privately owned general aviation airports.14
The act also required the Secretary of Transportation to publish a national plan for
the development of public-use airports in the United States. This biannual
publication is called the National Plan of Integrated Airport Systems (NPIAS). The
NPIAS identifies airports that are considered important to national transportation.
For an airport to receive AIP funds it must be listed in the NPIAS.15 In reauthorizing
the Aviation Trust Fund, the act also adjusted the schedule of aviation user fees.
12
For a detailed discussion of the history of the various cap and penalty provisions and other
spending guarantees, see CRS Report RL33654, Aviation Spending Guarantee Mechanisms,
by Robert S. Kirk.
13
Airport aid for those years was appropriated at $450 million per year. Certain aviation
fee revenues went into the Treasury’s general fund and the Highway Trust Fund. The
defederalization debate centered around proposals to withdraw federal aid from major air
carrier airports on the grounds that the federal government was overly involved in airport
development finance and that large airports could finance any needed development
themselves.
14
15
See the discussion in Appendix A, at the end of this report, for more detail.
Federal Aviation Administration, National Plan of Integrated Airport Systems (NPIAS)
2007-2011, (Washington, FAA, 2006), 1. According to the FAA, 3,431 (including 67
proposed NPIAS airports) of the 19,847 airports existing in the United States are listed in
the NPIAS. Unless otherwise stated, the discussion in this paper refers to the NPIAS or
“national system” airports.
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Although the act was amended often in the 1980s and early 1990s, the general
structure of the program remained the same.16
The Wendell H. Ford Aviation Investment and Reform Act
for the 21st Century of 2000 (AIR21, P.L. 106-181)
AIR21’s enactment was the culmination of two years of legislative effort to
pass a multi-year FAA reauthorization bill.17 The length of the effort was a reflection
of the difficult issues faced. Major issues that had to be resolved included the
budgetary treatment of the aviation trust fund, raising or eliminating the ceiling on
the passenger facility charge (PFC), and the spending amounts and their distribution.
Rather than enacting further modifications of the “cap and penalty” provisions,
AIR21instead included a so-called “guarantee” that all of each year’s receipts and
interest credited to the trust fund will be made available annually for aviation
purposes. The guarantee is enforced by changes made in House and Senate point-oforder rules. One rule makes it out-of-order to consider legislation that does not spend
all trust fund revenues for aviation purposes. The second rule makes it out-of-order
to consider legislation for funding FAA’s Operations and Maintenance (O&M) or
Research, Engineering and Development (R,E&D) budgets if AIP and the Facilities
and Equipment (F&E) budgets are funded below authorized levels. As is discussed
later in this report, the funding guarantees have not been enforced in recent years
because points-of-order have either been waived by the House Rules Committee or
have not been raised by Members on the floor of the House or Senate.
AIR21 did not, however, make any major changes in the overall structure or
functioning of AIP. It did make a major change in the amount of money made
available for airport development projects. From a funding level of approximately
$1.9 billion for FY2000, AIP’s authorization increased funding by nearly 70% to
$3.2 billion for FY2001, then to $3.3 billion for FY2002, and to $3.4 billion for
FY2003. The bill also made changes in funding distribution to facilitate the larger
amounts authorized. The formula funding and minimums for primary airports were
doubled starting in FY2001; the state apportionment for general aviation airports was
increased from 18.5% to 20%; the noise set-aside was increased from 31% to 34%
of discretionary funding and a reliever airport discretionary set-aside of 0.66% was
established.18
16
Authority to collect taxes for the trust fund expired on January 1, 1996 and the trust fund
received no revenues for nearly eight months until it was extended to the end of the
calendar year. Tax authority then expired for another two months. Spending from the trust
fund continued during these lapses, however.
17
During the debate AIP underwent four separate authorization extensions: P.L. 105-227
extended AIP through March 31, 1999; P.L. 106-6 through May 31, 1999; P.L. 106-31
through August 6, 1999; and, finally, P.L. 106-59 through September 30, 1999. The AIP
was held in abeyance from October 1, 1999 until AIR21 was enacted on April 5, 2000. See
CRS Report RS21621, Surface Transportation and Aviation Extension Legislation: A
Historical Perspective, by John W. Fischer and Robert S. Kirk.
18
An increase in AIP funding of the size of the AIR21 increase, faces a number of obstacles
(continued...)
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AIR21 also increased the PFC maximum to $4.50 per boarding passenger. In
return for imposing a PFC above the $3 level, large and medium hub airports would
give back, or “forgo,” 75% of their AIP formula funds. This made more AIP funding
available to the smaller airports.
Vision 100: Century of Aviation Reauthorization Act
of 2003 (P.L. 108-176; H.Rept. 108-334)
Vision 100, the FAA reauthorization act, signed by President George W. Bush
on December 12, 2003, included some changes to AIP but not on the scale of the
changes made under AIR21. Both the funding increase and the programmatic
changes were modest by comparison. Vision 100 funded AIP for four years at the
following annual levels: $3.4 billion for FY2004; $3.5 billion for FY2005; $3.6
billion for FY2006; and $3.7 billion for FY2007. The law extended the AIR21
spending “guarantees” through FY2007.
Sources of Project Funding for Airports
The AIP is one of five major sources of funding for airport development and
improvement.19 Airports also fund capital projects using tax-exempt bonds,
passenger facility charges (PFCs; a local tax levied on each boarding passenger), state
and local grants, and airport revenue.20 Different airports use different combinations
of these sources depending on the individual airport’s financial situation and the type
of project being considered. Small airports are more likely to be dependent on AIP
grants than large or medium-sized airports. The larger airports are also much more
likely to participate in the tax-exempt bond market or finance capital development
projects with the proceeds generated from PFCs. Each of these funding sources
places differing legislative, regulatory, or contractual constraints on airports that use
them.
Bonds, AIP, and PFCs are the primary sources of funding for airport capital
projects. Based on 1999-2001 data, the U.S. General Accounting Office (now the
Government Accountability Office) (GAO), found in 2003 that the airport system
received an average of $12 billion per year from all sources for capital development.
Of this amount, bonds accounted for 59%, AIP for 21%, PFCs for 13%, state and
local contributions for 4%, and airport revenue for 4%.21 The average amounts made
18
(...continued)
in the 110th Congress, that are discussed later in this report, including deficit reduction
efforts, enforcement of pay-as-you-go rules, and the spending of limited available funds on
other initiatives such as air traffic control modernization.
19
For more see, CRS Report 98-579, Airport Finance: A Brief Overview, by Robert S. Kirk.
20
Airport revenue sources include airfield area fees/landing fees, terminal area concessions
and rent, airline leases, parking, etc. PFCs are sometimes referred to as a “head tax.”
21
General Accounting Office (GAO; now the Government Accountability Office), Airport
Finance: Past Funding Levels May Not be Sufficient to Cover Airports’ Planned Capital
(continued...)
CRS-7
available for AIP and the average annual PFC collections have been significantly
higher since FY2001 (because of the AIR21 increase in AIP funding and the raised
PFC ceiling), so the AIP and PFC percentages of total capital spending are probably
now higher than was the case in date range covered in the GAO study.22 Bonds,
however, doubtless remain the largest source of funding for airport capital projects.23
Of the 3,364 airports in the national airport system all but 113 are public sector
enterprises that usually operate under a city, county, or state department or a specially
contrived organization such as an airport or port authority. Generally, airports can
do little to influence their financial relationship to their governmental sponsors. On
the other hand, airports that handle commercial service aircraft are able to negotiate
the terms and conditions of their agreements with their major users and creditors.
The source of airport development funds sets the different limitations and
obligations that influence how project money can be raised and spent. The
availability and conditions of one source of funding may also influence the
availability and terms of other sources of funding. The two financing sources for
airports with the most significant federal involvement are the AIP and PFC programs.
As mentioned above, the dependence on AIP to pay for capital needs varies
greatly according to airport size categories, with the smaller airports being more
dependent on AIP funding.24 Large and medium-hub airports finance much of their
capital expenditures by using bonding and PFCs, and rely on AIP for only 16% and
29%, respectively, of their total capital spending. For small-hub airports the
dependence on AIP grants rises to 51%. For non-hub commercial service airports
AIP dependence rises to 89% and for other non-hub airports to 94%.25
Airport Improvement Program (AIP)
The AIP provides federal grants to airports for airport development and
planning. The airports participating in the AIP range from very large publicly-owned
primary commercial service airports to small public use general aviation airports that
may be privately-owned (but are required under AIP to be available for public use).
As mentioned earlier, AIP funding is usually limited to construction or improvements
21
(...continued)
Development (Washington: GAO), GAO-03-497T, 2003, 7.
22
The 2007-2011 NPIAS estimates that AIP and PFCs together account for about 40% of
capital spending needs.
23
Because PFCs are often used to make debt payments, this use reduces the total of PFC
revenues used to directly pay for airport projects. This means that the amounts actually
available for airport projects will be somewhat less that the grand total of AIP, PFCs, bonds,
local grants, and airport revenues dedicated to capital improvements.
24
25
See Appendix B for airport definitions.
Based on FY2003 data, see FAA. Airports Data Package for Stakeholders. Available at
[http://www.faa.gov/about/office_org/headquarters_offices/aep/aatf/media/Airports%20
Data%20Package.pdf].
CRS-8
related to aircraft operations, such as runways and taxiways. Commercial revenue
producing facilities are generally not eligible for AIP funding, nor are operational
costs.26 The structure of AIP funds distribution reflects legislatively set national
priorities and objectives of assuring airport safety and security, stimulating capacity
building, reducing congestion, helping fund noise and environmental mitigation
costs, and financing small state and community airports. There is less federal
involvement in the four other sources of airport development funds.
The main financial advantage of AIP to airports is that, as a grant program, it
can provide funds for a known range of capital projects without the financial burden
placed on airports by bond or other debt financing. Limitations on the use of AIP
grants include the range of projects that AIP can fund and the requirement that
airports adhere to all program regulations and grant assurances.
This section begins with a brief discussion of the source of the money that is
used to pay for AIP grants, the Airport and Airway Trust Fund (AATF: aviation trust
fund, hereafter simply referred to as the trust fund), followed by a description of the
AIP’s system of project grant distribution. The section then describes AIP funding
in terms of what types of projects the grants are spent on and examines grant
distribution by airport size. Finally, it discusses AIP’s complement, the PFC
program.
The Airport and Airway Trust Fund
Modeled on the Highway Trust Fund, this trust fund was designed to assure an
adequate and consistent source of funds for federal airport and airway programs.27
The trust fund is also the primary funding source for most FAA activities in addition
to federal grants for airports. These include, facilities and equipment (F&E);
research, engineering, and development (R,E&D); and FAA operations and
maintenance (O&M). O&M also, however, receives some funding from the Treasury
general fund. Air traffic system capital maintenance and improvement falls primarily
under the F&E category. Under the 1970 Act the trust fund was to have been both
a capital account and, when excess funds existed, a user-pay system to help support
FAA’s administrative and operations costs.28
26
For detailed guidance on allowable costs see chapter 3 of the AIP Handbook, at
[http://www.faa.gov/airports_airtraffic/airports/resources/publications/orders/media/aip_
5100_38c.pdf].
27
Although the Airway and Airport Trust Fund was modeled after the Highway Trust Fund,
there are differences in the way funds are distributed. One major difference is that highway
spending is funneled through the states whereas most airport development funds go directly
to airports.
28
See Government Accounting Office, Congressional Intent: Whether or Not the Airport
and Airway Trust Fund Was Created Solely to Finance Aviation “Infrastructure,” “B281779” (Washington, GAO, 1999), 16 p. For another discussion of congressional intent
regarding the debate over the use of aviation trust fund revenues for both airport and airway
infrastructure as well as spending on FAA operations, see also Congressional Budget Office,
The Status of the Airport and Airway Trust Fund (Washington, CBO, 1988), 1-18.
CRS-9
The money that goes into the Aviation Trust Fund comes from a variety of
aviation user fees and fuel taxes.29 As mentioned earlier, these tax revenues were
authorized until September 30, 2007, by the Taxpayer Relief Act of 1997 (P.L. 10534). The authority for these taxes has been extended through June 30, 2008. Revenue
sources (current rate as of January 1, 2008) include:
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7.5% ticket tax
$3.50 flight segment tax30
6.25% tax on cargo waybills
4.3 cents on commercial aviation fuel
19.3 cents on general aviation gasoline
21.8 cents on general aviation jet fuel
$15.40 international arrival tax31
$15.40 international departure tax
7.5% “frequent flyer” award tax32
7.5% ticket tax at rural airports33
Over much of the life of the trust fund, these revenues plus interest on the trust
fund’s unexpended balances often brought more revenue into the fund than was being
paid out. This led to the growth in the end-of-year unexpended balance in the trust
fund. There are outstanding commitments against these unexpended balances, so not
all of the unexpended balance would actually be available in any given year.
Nonetheless, these unexpended balances (somewhat inaccurately referred to by some
as a surplus) have been large enough, at times, during the history of the aviation trust
fund to make their existence controversial.
The scenario of an unexpended trust fund balance, that grows substantially
larger each year, ended in FY2001. Most observers believe the drop in demand for
air travel that began during 2001, due at first to a recessionary economy and later to
potential fear of flying following the September 11 attacks, significantly reduced the
revenues flowing to the trust fund. In addition, AIR21established a mechanism to
ensure that all trust fund receipts would be committed to spending on aviation each
29
U.S. Internal Revenue Code sec. 4041,4081, 4091, 4261-4263,4271, 9502. See also P.L.
105-34 sec. 1031-1032. See also CRS Report RS21321, Aviation Taxes and Fees: Major
Issues, by John W. Fischer, and CRS Report RL30050, Aviation: Direct Federal Spending,
1918-1998, by John W. Fischer and Robert S. Kirk.
30
A flight segment is defined as “a single take-off and a single landing.” The flight segment
fee has been inflation adjusted (rounded off to the nearest dime) on an annual basis
beginning on January 1, 2004.
31
Both the international arrival and departure taxes have been adjusted (rounded off to the
nearest dime) for inflation on an annual basis since January 1, 1999. The rate for U.S.
flights to and from Alaska or Hawaii is $7.70.
32
This tax is not limited to frequent flyers but includes all second party purchases of airline
miles.
33
Rural airport passengers pay only the rural airport ticket tax. They do not pay the segment
tax on the segment to or from the rural airport, and do not pay the general ticket tax in
addition to the rural airport ticket tax.
CRS-10
year. The forecast levels of receipts were drawn from the President’s budget baseline
projection for each year. For FY2002 through FY2005, actual trust fund revenues
fell below the forecast revenues. Consequently, this meant that more money was
being committed than was being collected in revenues and the difference was drawn
from the trust fund’s uncommitted balance. The uncommitted balance in the aviation
trust fund fell from $7.3 billion at the end of FY2001 to $1.9 billion at the end of
FY2005. The U.S. Government Accountability Office (GAO) projects that, under
Vision 100 spending levels, the uncommitted balance will fall to $1.7 billion in
FY2007.34 Although it appears that the uncommitted balance will remain positive
through FY2007, it is important to keep in mind that the taxes that provide revenue
to the trust fund will lapse unless reauthorized by the end of FY2007. Historically,
achieving agreement on the authorization of aviation taxes has been difficult. The
authority to collect aviation taxes lapsed for significant periods in 1980 and 1996.
At the times of these lapses there existed in the trust fund large accumulated
unobligated balances, which permitted the funding of AIP and other FAA programs
to continue in spite of the absence of new tax revenue. It appears that this will not
be the case after September 30, 2007. Based on GAO’s projections, the trust fund’s
uncommitted balance would not be sufficient to fund FAA programs, including AIP,
for long in the event that the aviation taxes are allowed to lapse.
The adequacy of trust fund revenue under the current tax regime, for the years
ahead, has recently also been an issue of significant debate.35 The basic question is
whether the current revenue streams from the existing tax sources at their existing
rates will be adequate to fund FAA programs and activities without the trust fund
going into deficit before or during the next authorization cycle. The expected
availability of trust fund revenues could influence whether the transportation
authorizing committees in Congress recommend modest, significant or no growth in
AIP funding in their legislative proposals. Both the FAA and the Department of the
Treasury projections indicate that any increases in revenues flowing into the trust
fund will be modest.36 The Congressional Budget Office (CBO) has produced an
estimate that is somewhat more positive about future revenues.37 The Aircraft
Owners and Pilots Association (AOPA) has also produced revenue forecasts that
34
Government Accountability Office, Federal Aviation Administration: An Analysis of the
Financial Viability of the Airport and Airway Trust Fund, GAO-06-562T, (Washington,
GAO, 2006), 15 p. GAO also estimated that if revenues were 5% less than projected the
uncommitted balance would fall to $595 million in FY2007 and to $0 if revenues were 10%
less than projected.
35
For a concise description of the aviation trust fund adequacy debate, see CRS Report
RL33698, Reauthorization of the Federal Aviation Administration: Background and Issues
for Congress, coordinated by Bart Elias.
36
For the FAA view, see [http://www.faa.gov/airports_airtraffic/trust_fund/media/Trust_
Fund.pdf]
37
CBO, Financing Investment in the Air Traffic Control System: Statement of Donald
Marron, Testimony Before the House Committee on Transportation and Infrastructure,
Subcommittee on Aviation, September 27, 2006.
CRS-11
suggest that the trust fund will have adequate revenues well into the future.38
Because of the current small size of the uncommitted balance in historical terms, the
assumptions of the size of the annual revenue flows to the trust fund in the
forthcoming FAA reauthorization bill could have an impact on both the AIP
authorization levels and the programmatic provisions in the upcoming authorization
bills.
AIP Funding
AIP spending authorized and the amounts actually made available since FY1982
are illustrated in Figure 1. From FY1982 to FY1992 the yearly amounts made
available (obligation limitations) in the annual appropriations bills trended upwards,
increasing from $450 million to $1,900 million.
Figure 1. AIP Authorizations and Amounts Made Available for AIP,
FY1982-FY2007
4000
3500
3000
2500
2000
1500
1000
500
19
82
19
83
19
84
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
0
Fiscal Year
Authorization
Amount Available
Source: FAA.
This upward trend was reversed in the mid-1990s. For FY1993-FY1997
spending was reduced as part of overall federal deficit reduction efforts. As can be
seen in both Figure 1 and Table 1, below, the amounts made available for AIP
spending declined in FY1993 and FY1994 before leveling off at about the $1.5
billion level during FY1995-FY1997. The amounts made available increased
significantly in FY1998-FY1999 but the gaps between these funding levels and AIP’s
authorized levels remained in the neighborhood of $500 million. The gaps were a
major target of criticism from both airport advocates and members of the
38
Statement available at [http://www.aopa.org/whatsnew/la-userfees.html].
CRS-12
transportation authorizing committees in Congress during the debate that preceded
the enactment of AIR21.39
Table 1. Annual AIP Authorizations and Amounts
Made Available, FY1992-FY2007
($ millions)
Fiscal Year
Authorization
Amount Made Available
1992
$1,900
$1,900
1993
$2,025
$1,800
1994
$2,970
$1,690
1995
$2,161
$1,450
1996
$2,214
$1,450
1997
$2,280
$1,460
1998
$2,347
$1,700
1999
$2,410
$1,950
2000
$2,475
$1,851
2001
$3,200
$3,140
2002
$3,300
$3,223
2003
$3,400
$3,295
2004
$3,400
$3,294
2005
$3,500
$3,384
2006
$3,600
$3,515
2007
$3,700
$3,515
Sources: Various authorization acts, FAA, Airports Branch, CRS Report RL34046, Transportation,
Housing and Urban Development, and Related Agencies (THUD): FY2008 Appropriations, by David
Randall Peterman and John Frittelli.
The major increases in AIP’s authorization, provided for in AIR21, began in
FY2001 at $3.2 billion. This was an increase of nearly 70% over the FY2000
enacted funding. FY2001 was also the first year that the AIR21 point-of-order
spending guarantees of AIP and F&E spending were active. During FY2001-FY2006
AIP was funded near its fully authorized levels. The difference between the
authorized levels and the yearly amounts made available narrowed significantly in
comparison to the previous eight years. The remaining shortfalls mostly reflected the
impact on AIP of government-wide across-the-board rescissions and of some
administrative and minor programmatic funding transfers that were included in the
annual appropriations bills.
39
In some years the annual AIP obligation limitation has supported some other uses. This
reduced the amounts made available for AIP below the obligation limitation in some years.
CRS-13
Vision 100, as mentioned earlier, continued the spending guarantees included
in AIR21 through FY2007. During the years the guarantees were in effect (FY2001FY2007), appropriators initially provided funding at the authorized level, but then
reduced the amounts provided by the imposition of across-the-board rescissions.
Technically the failure of the amount made available to achieve the authorized level
should have made these spending levels subject to the spending guarantee’s point of
order provisions. In recent years, however, all points of order on appropriations bills
have been waived by the Rules Committee in the House or have not been raised on
the floor of the House and Senate. This, as well as the recent failure to fully fund the
F&E account, brings into question the effectiveness of the so-called spending
guarantees for AIP.40 The Consolidated Appropriations Act, 2008 (P.L. 110-161;
Division K), makes $3.515 billion available for AIP. AIP is, however, only
authorized through June 30, 2008.
AIP Funding Distribution
The distribution system for AIP grants is complex. It is based on a combination
of formula grants (also referred to as apportionments or entitlements) and
discretionary funds.41 Each year the entitlements are first apportioned by formula to
specific airports or types of airports including primary airports, cargo service airports,
states and insular areas, and Alaska airports. The remaining funds are defined as
discretionary funds. Discretionary funds are applied for by airports to pay for
planned airport capital development needs. In recent years, however, significant
amounts of AIP discretionary funding have been earmarked by Congress.42 Formula
grants and discretionary funds are not mutually exclusive, in the sense that airports
receiving formula funds may also apply for and receive discretionary funds.
Airport legislation sets forth definitions of airports by type that are relevant both
in discussions of the airport system in general and AIP funding distribution in
particular. Because the statutory provisions for the allocation of both formula and
discretionary funds depend on some of these definitions, these definitions are set
forth in Appendix B at the end of this report.
Formula and Discretionary Funds.
Formula Funds. Sometimes referred to as apportionments or entitlements,
these funds are apportioned by formula or percentage. Formula funds may generally
be used for any eligible airport or planning project. Formula funds are divided into
four categories, primary airports, cargo service airports, general aviation airports, and
Alaska supplemental funds (see Appendix B for airport definitions). Each category
40
See CRS Report RL33654, Aviation Spending Guarantee Mechanisms, by Robert S. Kirk.
41
See U.S.C. 49 Chapter 471 and FAA, Airport Improvement Program Handbook.
Available at [http://www.faa.gov/airports_airtraffic/airports/resources/publications/orders/
media/aip_5100_38c.pdf].
42
For an explanation of FAA’s policy for selecting discretionary projects see the 21st AIP
Annual Report of Accomplishments. P. 25-27. Available at [http://www.faa.gov/airports_
airtraffic/airports/aip/grant_histories/media/Annual_Report_2004.pdf].
CRS-14
distributes AIP funds by a different formula. Most airports have up to three years to
use their apportionments. Non-hub commercial service airports (the smallest of the
primary airports) have up to four years. The formula changes implemented in AIR21
and, in some cases, modified in Vision 100 are contingent on an AIP funding level
of $3.2 billion or more. If this threshold is not met, most formulas revert to prior
authorized funding levels. For instance in the case of the primary airport entitlement
the Vision 100 authorized doubling of the formula amounts would not take place.
Primary Airports. The apportionment for primary airports is based on the
number of passenger boardings made at the airport during the prior calendar year.
The amount apportioned for each fiscal year is equal to double the amount that would
be received according to the following formulas:
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$7.80 for each of the first 50,000 passenger boardings;
$5.20 for each of the next 50,000 passenger boardings;
$2.60 for each of the next 400,000 passenger boardings;
$0.65 for each of the next 500,000 passenger boardings; and
$0.50 for each passenger boarding in excess of 1 million.
The minimum formula allocation is $1 million. The maximum is $26 million.
New airports receive the minimum for their first fiscal year of operation.
Virtual Primary Airports. Vision 100 included a special rule for certain airports
that no longer meet the requirement of 10,000 enplanements to be categorized as
primary airports but had met the requirement in calendar years 2000 or 2001.43 The
act allowed these airports to continue to receive their full entitlement (i.e. of formula
funds), usually the $1 million primary airport minimum, for FY2004 and FY2005.
The entitlement would otherwise have dropped to $150,000 in most cases. The
FY2006 Transportation/Treasury Appropriations Act (P.L.109-115) extended the
virtual primary airport eligibility through FY2006 but at a reduced entitlement of
$500,000. The explanatory language in the conference report expresses the
conferees’ intent that FY2006 be the last year for virtual primary airport entitlements.
Accordingly, the FY2007 Continuing Resolution (H.J.Res. 20) did not extend the
virtual primary funding distribution, in effect, eliminating the virtual primary
distribution category. Paying the higher entitlements to the virtual primary airports
reduces the amount of funding available for discretionary spending.
Cargo Service Airports. 3.5% of AIP funds subject to apportionment are
apportioned to cargo service airports. The allocation formula is the proportion of the
individual airport’s landed weight to the total landed weight at all cargo service
airports.
State/Insular Areas. 20% of AIP funds are to be apportioned to general aviation,
reliever, and nonprimary commercial service airports. From this share, all airports,
excluding all non-reliever primary airports, receive the lessor of:
43
Vision 100 required that the Secretary of Transportation find that the decline in passenger
boardings at each of these airports was due to the 9/11 attacks. There were 55 virtual
primary airports in FY2005.
CRS-15
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!
$150,000 or
one-fifth of the estimated five-year costs for AIP eligible
development costs for each of these airports published in the most
recent National Plan of Integrated Airport Systems (NPIAS) to a
maximum of $200,000 per year.
Any remaining funds are distributed according to a state-based population and
area formula.44 The FAA makes the project decisions on the use of these funds in
consultation with the states. Although FAA has ultimate control of the use of these
remainder funds, some states view these funds as an opportunity to address some
general aviation needs from a state-wide, rather than a local or national, perspective.45
Alaska Supplemental Funds. Funds are apportioned to Alaska to assure that
Alaskan airports receive at least twice as much funding as they did under the ADAP
in 1980.
Foregone Apportionments. Large and medium hub airports that collect a
passenger facility charge of $3 or less have their AIP formula entitlements reduced
by an amount equal to 50% of their projected PFC revenue for the fiscal year until
they have foregone (sometimes referred to as a “give back”) 50% of their AIP
formula grants. In the case of a fee above the $3 level the percentage foregone is
75%. The implementation of the reduction is not imposed until the first fiscal year
following the calendar year in which the PFC is first imposed.
A special Small Airport Fund, which provides grants on a discretionary basis
to airports smaller than medium hub, gets 87.5% of these foregone funds. The
discretionary fund gets the remaining 12.5%.
Discretionary Funding. The discretionary fund (49 U.S.C. sec. 4711547117) includes the money not distributed under the apportioned entitlements, as
well as the foregone PFC revenues that were not deposited into the Small Airport
Fund. In recent years, AIP discretionary funds have ranged from roughly 25%-30%
of the total annual AIP funding distribution.46 Discretionary grants are approved by
the FAA based on project priority and other selection criteria, including
congressional directives in appropriations legislation. Despite its name, the
44
For FY2006, 99.4% of the remaining funds ($298 million) were distributed to the 50
states, the District of Columbia, and Puerto Rico. The remainder 0.6% was apportioned to
Guam, American Samoa, the U.S. Virgin Islands and the Commonwealth of the Northern
Mariana Islands.
45
Block grant states, discussed later in this report, receive a block grant consisting of their
general aviation airports’ apportionments and, if available, AIP discretionary funds. These
states select and fund AIP projects at their small airports. They also perform most of FAA’s
inspection and oversight roles at these airports.
46
Based on figures from the AIP Annual Reports of Accomplishments, for FY2001-FY2003
and FY2004 and FAA’s Airports Branch for FY2005. The discretionary funding percentage
for FY2001 was 30%, for FY2002 was 25%, for FY2003 was 25%, for FY2004 was 27%,
and for FY2005 was 25%.
CRS-16
discretionary fund is subject to three set-asides and certain other spending criteria.
The three set-asides are:
Airport Noise Set-Aside. At least 35% of discretionary grants are set-aside for
noise compatibility planning and for carrying out noise abatement and compatibility
programs.
Military Airport Program (MAP). At least 4% of discretionary funds are setaside for conversion and dual use of current and former military airports. Fifteen
airports may participate. The MAP provides financial assistance for capacity and /or
military-to-civilian use conversion projects at former military or current joint-use
airports. MAP allows funding of some projects not normally eligible under AIP.47
Grants for Reliever Airports. There is a discretionary set-aside of 2/3 of 1% for
reliever airports in metropolitan areas suffering from flight delays.
The Secretary of Transportation is also directed to see that 75% of the grants
made from the discretionary fund are used to preserve and enhance capacity, safety
and security at primary and reliever airports, and also to carry out airport noise
compatibility planning and programs at these airports. From the remaining 25%, the
FAA is required to set aside $5 million for the testing and evaluation of innovative
aviation security systems.
Subject to these limitations, the three set-asides, or priority directives from the
appropriation committees (referred to by some as “place naming,”),48 the Secretary,
through the FAA, has discretion in the distribution of grants from the remainder of
the discretionary fund.
Figure 2 presents an overall picture of both apportioned and discretionary
grants, based on FY2005 data.
47
For more on MAP, see [http://www.faa.gov/airports_airtraffic/airports/aip/military_
airport_program/]
48
See the discussion of place naming in the following the “Congressional Issues” section
of this report.
CRS-17
Figure 2. Distribution Entitlement and Discretionary
Grants for 2006
Small Airport Fund
11%
Primary
26%
Reliever
1%
Other Disc.
15%
Noise
35%
Discrectionary
25%
Map
4%
C/S/S/N*
45%
Carryover
13%
States
20%
Cargo
3.5%
Alaska
1%
Source: FAA.
Notes: Figures have been rounded to the nearest percent. C/S/S/N = Capacity, Safety, Security, &
Noise Abatement.
State Block Grant Program.49 Under this program the FAA provides funds
directly to participating states for projects at airports classified as other than primary
airports (non-primary commercial service, reliever and general aviation airports).
Each participating state receives a block grant made up of the state’s apportionment
(formula) funds and available discretionary funds. A block grant program state is
responsible for selecting and funding AIP projects at the small airports in the state.
In making the selections the participating states are required to comply with federal
priorities, however. Each block grant state is responsible for project administration
as well as most of the inspection and oversight roles normally done by the FAA. Up
to ten states may participate. Currently the state block grant program states are,
Illinois, Michigan, Missouri, North Carolina, Pennsylvania, Tennessee, Texas, and
Wisconsin (New Jersey is in the process of withdrawing from the program).
The Federal Share of AIP Matching Funds. For AIP development
projects, the federal government share differs depending on the type of airport. The
federal share, whether funded by formula or discretionary grants, is as follows:
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49
75% for large and medium hub airports (80% for noise compatibility
projects);
95% for other airports; and
“not more than” 95% for airport projects in states participating in the
state block grant program;
49 U.S.C. Sec. 47128. For program requirements see 14 C.F.R. Part 156. See also 21st
AIP Annual Report of Accomplishments, p.29-30. Available at [http://www.faa.gov/
airports_airtraffic/airports/aip/grant_histories/media/Annual_Report_2004.pdf].
CRS-18
!
70% for projects funded from the discretionary fund at airports
receiving exemptions under, 49 U.S. sec. 47134, the pilot program
for private ownership of airports.
Vision 100 included a sunset clause that returns the federal share of the projects
eligible for 95% share to 90% after FY2007. The increase in share to 95% was
established to provide relief to operators of small airports after the 9/11 terrorist
attacks.
The airports themselves must raise the remaining share from other sources.
Unlike federal aid to highways, AIP grants generally go directly to airports rather
than through the states. This federal share regime means that smaller airports do not
pay as high a percentage of AIP eligible funded project costs as large and medium
airports do. Some argue that the high federal share for small airports may be a factor
in the low level of participation by small airports in the bond market (i.e., why
borrow when federal AIP grants may eventually be available at a 95% federal share).
Distribution of AIP Grants by Airport Size. The appropriateness of the
distribution of grants among airports of different sizes has, at times, been a source of
debate. Although smaller airports’ individual grants are of much smaller dollar
amounts than the grants going to large and medium hub airports, the smaller airports
are much more dependent on AIP to meet their capital needs. In FY2006, of the
2,059 grants issued by the FAA, 196 (9.5%) of the grants (representing, by value,
32.6% of AIP grant amounts) financed projects at large and medium-hub airports.
For the same fiscal year, small airports were awarded 1,805 grants (or 87.7% of the
total individual airport grants awarded). By dollar value, these small airport grants
accounted for 65.1% of the total dollar value of AIP grants for FY2006.50
The FY2006 percent value of AIP grants awarded, broken out by airport size,
is displayed in Figure 3. The chart displays the percentage aggregates of all AIP
funds derived from all categories of both formula and discretionary funds.
Depending on how the chart is viewed, it could either support or refute the contention
that AIP funding distribution favors large airports. Although the large hub primary
airports got the highest percentage (20.7%) of the total funds awarded, the smaller
of the primary airports — the primary non hub airports and the small hub airports —
also received substantial percentages of the total AIP funds awarded (18.8% and
13.9%, respectively). If one counts only the large and medium hub airports as
“major” airports and all the others as “small” airports one could argue that only
32.6% of grant awards went to major airports. On the other hand, general aviation
advocates could point out that primary airports as a group were awarded 65.3% of
AIP grants amounts.51
50
Source: FAA, Airports Branch data. By value, an additional 2.8% of AIP grants were
provided for airport system planning (composed of 58 grants, or 2.3% of all grants).
51
As set forth in Appendix B of this report, of all national enplanements, large hub airports
account for 68.7%, medium hub airports for 20%, small hub airports for 8.1%, non-hub
primary airports for 3%, and non-primary commercial service airports for 0.1%.
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Figure 3. FY2006 % Value of AIP Grant Distribution
by Airport Size
General
Aviation 15.6%
Large Primary
20.7%
Medium
Primary 11.9%
Integrated
Planning 2.3%
State Block
Grant/Sponsor
ed 7.8%
Small Primary
13.9%
Reliever 6.4%
Nonprimary
Commercial
Service 2.7%
Primary
Nonhub 18.8%
Source: FAA. Airports Branch, 2006 AIP Report.
AIR21’s provisions raised the percentage share of total AIP funding for smaller
airports. This may be, in part, because, beginning with AIR21, large and medium
hub airports have to forego 75% of their AIP formula funds in return for the ability
to impose PFCs at the $4.50 level.
What the Money is Spent On. Figure 4 below, displays AIP grants
awarded by type of project during FY1992-FY2006. For the most part, AIP
development grants support “airside” development projects such as runways,
taxiways, aprons, navigational aids, lighting, and airside safety projects. Substantial
AIP funds also go for state block grants and noise planning and abatement. AIP
spending on roads is generally restricted to roads on or entering airport property.52
52
For AIP eligibility criteria and allowable costs see the AIP Handbook, 27-37. See
[http://www.faa.gov/airports_airtraffic/airports/resources/publications/orders/media/aip_
5100_38c.pdf].
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Figure 4. AIP Grants Awarded, by Type, FY1992-FY2006
Landside
(mostly
terminal)
13.10%
Noise 10.1%
Roads 2.4%
State Block
Grants &
Misc. 9.6%
Airside 64.7%
Source: FAA, Airports Branch, 2006 AIP Report.
Letters of Intent (LOI). In cases where an airport sponsor may want to begin
an AIP eligible airport project without waiting for the funds to become available, the
FAA is authorized to issue a letter of intent (LOI).53 Under the LOI program, a
primary or reliever airport sponsor may notify the FAA of their intent to carry out an
AIP eligible airport development project in advance of federal funding and request
that the FAA issue an LOI for the project. If the FAA agrees, it issues a letter (the
LOI) stating that the eligible project costs, up to the allowable federal share, will be
reimbursed according to a schedule set forth in the letter. Although the LOI is
technically not an obligation of the federal government to pay, it is an indication of
the FAA’s approval of the scope and timing of the project, as well as the federal
intent to fund the project in future years. Because most primary airports fund their
major development projects with tax-exempt revenue bonds, the evidence of federal
support that the LOI provides is likely to lead to favorable bond rates in financing the
project.54 With an LOI, the airport may proceed with the project both without waiting
for the AIP grants to become available and with the assurance that all AIP allowable
costs in the LOI will remain eligible for reimbursement over the life of the LOI. Both
entitlement and discretionary funds are used to fulfill LOIs. The FAA limits the total
of discretionary funds in all LOIs subject to future obligation to roughly 50% of
forecast available discretionary funds.
LOIs have certain eligibility restrictions. They can only be issued to cover
projects at primary and reliever airports. The proposed airport development project
or action must “enhance airfield capacity in terms of increased aircraft operations,
53
49 U.S.C. 47110. See also [http://www.faa.gov/airports_airtraffic/airports/aip/loi/].
54
The interest on these bonds is not an allowable AIP cost, however.
CRS-21
increased aircraft seating or cargo capacity, or reduced airfield operational delays.”
For large and medium hub airports, the project must enhance “system-wide airport
capacity significantly.”55
Voluntary Airport Low Emissions (VALE) Grants. Vision 100, directed
the FAA to establish a national program to reduce airport ground emissions at
commercial service airports located in air quality nonattainment and maintenance
areas (currently, roughly 160 airports can participate). The Voluntary Airport Low
Emissions (VALE) program allows airport sponsors to use Airport Improvement
Program (AIP) grants and Passenger Facility Charge (PFC) funds to help finance the
purchase of low emissions vehicles, refueling and recharging stations, gate
electrification, and other airport air quality improvements.56 VALE is restricted to
financing capital improvements and cannot pay for operations or maintenance costs
such as fuel purchases. The range of VALE uses for PFC funding is broader than
those allowable under AIP. For example, AIP funds are limited to vehicles and
infrastructure for “alternative fuel” use as defined by the Department of Energy,
whereas the PFC program allows for use of clean conventional fuels. Significantly,
VALE program funding is restricted to the “incremental” cost differential between
the higher priced low-emission vehicle and the lower price of a conventional fuel
vehicle. Retaining, changing, or eliminating these restrictions or eligibility criteria
could be considered during reauthorization.
AIP Grant Assurances. Airports’ grant applications are conditioned on
assurances regarding future airport operations. Examples of such assurances include
making the airport available for public use on reasonable conditions and without
unjust discrimination; charging air carriers making similar use of the airport
substantially comparable charges; maintaining a current airport layout plan; making
financial reports to the FAA; and expending airport revenue only on capital or
operating costs at the airport.57 Within the AIP context, assurances are an important
means of guaranteeing the implementation of federal policy. When airport
managers or interest groups express concerns about federal regulation and the
“strings attached” to AIP funding, they are usually referring to AIP grant assurances.
55
AIP Handbook, chapter 10, section 8.
56
According to the FAA gate electrification is the aircraft equivalent of vehicle idle
reduction. It provides for air conditioning and electricity for an aircraft parked at the gate.
57
49 U.S.C. sec. 47107. The layout plan must be approved by the Secretary of DOT as must
any revision or modification of the plan. This, in effect, generally means that any AIP
project must be written into the airport’s plan. The nondiscrimination provision protects a
wide variety of users, including for example, nighttime users and cargo carriers.
CRS-22
Passenger Facility Charges (PFCs)
During the late 1960s a number of airports began collecting a local “head tax”
(the precursor of the PFC) on each paying passenger boarding an aircraft.58 Although
the legality of the head tax was affirmed by the Supreme Court in EvansvilleVanderburgh Airport Authority v. Delta Airlines, there was severe criticism of the
passenger charges, by both airlines and passengers. The complaints included
administrative problems for the airlines collecting the charge; passenger
inconvenience, especially when the passengers had to make payments separately at
the airport; and the use of head tax revenue for off-airport projects and projects not
aviation related.59 In 1973, the Airport Development Acceleration Act (P.L. 93-44)
banned the imposition of state and local passenger charges.
In 1990, expected tight budgets, resulting from federal deficit concerns, led to
a reconsideration of head taxes. Concerns that the aviation trust fund and other
existing sources of funds for airport development would be insufficient to meet
national airport needs led to the legislation that developed the passenger facility
charge (PFC). The PFC was seen as being complementary to AIP funding. The
Aviation Safety and Capacity Expansion Act of 1990 (P.L. 101-508) allowed the
Secretary of Transportation to authorize public agencies that control commercial
airports to impose a passenger facility fee of $1, $2 or $3 on each paying passenger
boarding an aircraft at their airports. The money was to be used to finance eligible
airport-related projects and, unlike AIP funds, could be used to make payments for
debt service or indebtedness incurred to carry out the projects.60 There was a $3 cap
on each airport’s PFC and there was a $12 limit on the total PFCs that a passenger
could be charged per round-trip. Large and medium hub airports had their AIP
apportionments reduced by 50% of their projected PFC revenues until they had
forgone 50% of their apportionments. As mentioned earlier, 87.5% of these forgone
entitlement funds are credited to the Small Airport Fund and the discretionary fund
is credited the remaining 12.5%.61 Although the FAA oversees the PFC program, the
agency does not impose the fee. The PFC is a state, local, or port authority fee, not
a federally imposed tax. Because of the complementary relationship between AIP
and PFCs, PFC legislation is generally folded into the AIP provisions of FAA
reauthorization legislation. The legislative origin of the PFC itself is Title IX of the
Omnibus Budget Reconciliation Act of 1990 (P.L. 101-508).
58
The head tax was similar but not exactly the same as a PFC. There were no limits on how
the head tax could be spent. Head taxes and similar devices are common outside the United
States.
59
House Committee on Public Works and Transportation, Subcommittee on Aviation,
Passenger Facility Charges. Hearing, 101st Cong., 2nd sess., June 19, 1990, v-vi.
60
61
49 U.S.C. sec. 40117.
The Airport Capacity Funding Advisory Committee, which had recommended many of
the PFC characteristics, including that of forgone entitlements, recommended that small hub
and nonhub airports should not be required to forgo any AIP entitlement funds. The
committee also recommended that the forgone funds should all be shifted to the
discretionary fund and allocated proportionally across all “categories of the discretionary
category.”
CRS-23
AIR21 increased the PFC ceiling to $4.50. To impose a PFC above the $3 level
an airport has to show that the funded projects will make significant improvements
in air safety, increase competition, reduce congestion or noise impacts on
communities and that these projects could not be funded by using the airport’s AIP
formula funds or through AIP discretionary grants. Large and medium hub airports
imposing PFCs above the $3 level forego 75% of their AIP formula funds.
Beginning in FY2001, PFCs at large and medium hub airports could not be approved
unless they had submitted a written competition plan to the FAA. The competition
plans include information such as: the availability of gates; leasing arrangements;
gate-use requirements; patterns of air service; controls over air and ground-side
capacity; intentions to build gates that could be used as common facilities; and airfare
levels compared to other large airports. The Airports Council International/North
America (ACI-NA) favors the elimination of the competition plan requirement. The
competition plan provision, however, was supported by Members of Congress who
wanted to assure that the major airports be “available on a reasonable basis to all air
carriers wishing to serve those airports.”62
Vision 100 included a number of relatively minor changes to the PFC program.
The act included provisions to streamline PFC public notice requirements as well as
to end the “significant contribution” project requirement on large and medium hub
airports that wish to impose PFCs at the $4 and $4.50 level. As of December 1,
2006, 48 large and medium-hub airports and 215 smaller airports had been approved
to collect PFCs at the $4.50 level. The requirement of notice and consultation of air
carriers at applicant airports was limited to carriers having no less than 1% of the
boardings at the airport, having 25,000 or more boardings, or airports providing
scheduled service. Vision 100 also established a pilot program to test alternative
procedures for authorizing small airports to impose PFCs. It made conversion of
ground support equipment to low emission technology eligible for PFC funds. The
Secretary of Transportation was also empowered to allow the use of PFCs for debt
service on what would normally be non-eligible non-airport related projects, if the
Secretary finds that such project funding is necessary due to an airport’s financial
need. The act requires that airlines filing for bankruptcy must place PFC collections
in a segregated account to prevent their loss as airport revenue. Vision 100 required
DOT to publish in the Federal Register its policy under current law on the eligibility
of airport ground access projects for PFC funding.
Airports have used PFC revenues for a broad range of purposes. Unlike AIP
grants, of which 64.4% since 1992 have gone to airside projects (runways, taxiways,
aprons, and safety related projects), PFC revenues have been increasingly used for
landside and interest payments purposes (15.4% of approved PFCs have been for
airside spending since FY1992). Table 2 shows the AIP grant awards and PFC
approvals by project type for FY1992-FY2006.63
62
See AIR21 Conference Report, H.Rept. 106-513, 29-30, 165.
63
FAA, Airports Branch.
CRS-24
Table 2. Distribution of PFC Approvals and AIP Grants
by Project Type, FY1992-FY2006
Type of Project
Percentage of PFC
Percentage of AIP
Airside
16.7
64.7
Landside
34.6
13.1
Noise
4.9
10.1
Roads/Access
6.8
2.4
Interest on Bonds
31.4
0.0
Denver (PFC)/Other (AIP)
5.5
9.6
100.0
100.0
Total
Source: FAA, Airports Branch, 2006 AIP Report.
Note: Totals may not add because of rounding.
The PFC statutory language lends itself to a broader interpretation of “capacity
enhancing” and the implementing regulations are less constraining than those for AIP
funds. Also the airlines, who historically have preferred funding be dedicated to
airside projects, only have to be notified and provided with an opportunity for
consultation about PFC funding requests and are therefore somewhat less involved
in the PFC project planning and decision-making process than with AIP projects.
The difference in the pattern of project types may also be influenced by the difference
in project spending patterns between the larger airports, that collect most of the PFC
revenue and have more substantial landside infrastructure, versus the smaller airports
that are much more dependent on AIP funding and have comparatively limited land
side facilities.
In recent years, PFC approvals have most often been for interest on bonds and
for landside projects. As of March 31, 2008, PFCs approved were 32% for interest
on bonds, 37% for landside (primarily terminal) projects, 7% for access (mostly
roads), 19% for airside projects, and 5% for noise projects.
According to the FAA, as of the end of March 31, 2008, the agency had
approved $61.9 billion in PFC collections at a total of 372 locations over the life of
the program.64 Large and medium-hub airports are the most likely to impose a PFC,
with 97% collecting PFCs. Small hub and nonhub primary airports participate at
rates of 92% and 79%, respectively. Only 25% of nonprimary commercial airports
participate. Small airports often do not have a high enough ticketed passenger
volume to provide a sufficient revenue surplus over the costs associated with
implementing a PFC. A major use of PFCs at non-hub primary and smaller airports
64
FAA, Passenger Facility Branch, PFC Applications per Hub Size.
CRS-25
is to pay for the local share for AIP funded projects. Actual annual system-wide
collections have grown from $85.4 million in 1992 to $2.8 billion in 2007.65
AIP Funding of Airport Security
Prior to the passage of Vision 100, the AIP was the main source of federal
grants for airport security capital projects. In the years preceding the 9/11 terrorist
attacks, however, security projects only amounted to about 2% of AIP’s total project
spending. In FY2002, following the 9/11 terrorist attacks, the spending of AIP funds
for security projects expanded to 17% of the amounts made available for AIP grants
for that year ($561 million of the $3.2 billion of amounts made available). As the
AIP funding of security projects grew there was a proportional decline of AIP
resources dedicated to non-security projects. There were concerns among AIP
supporters that the program’s traditional priorities of enhancing capacity, safety, and
noise mitigation were in danger of being underfunded.66
Vision 100 made two major changes regarding the funding of airport security
projects. First, the act included a provision that repealed the language of the Federal
Aviation Reauthorization Act of 1996 (P.L. 104-264) that permitted the use of AIP
and PFC funds for security-related improvement of facilities and the purchase or
deployment of equipment for security purposes. Second, Vision 100 established the
Aviation Security Capital Fund to fund airport security related projects. Together,
these provisions were expected to relieve the AIP of the demands on its funds for
most security projects. The aviation security fee revenues credited to the fund,
however, have been insufficient to fully fund security costs.67 Consequently, despite
the Vision 100 prohibition, some still view AIP as a potential source of funding for
certain security-related airport improvements in the future. The use of AIP grants for
security purposes could reemerge as an issue during FAA reauthorization.68
65
For PFC collections by year, see [http://www.faa.gov/airports_airtraffic/airports/pfc/
monthly_reports/media/stats.pdf].
66
See GAO, Airport Finance: Using Airport Grant Funds for Security Projects Has Affected
Some Development Projects, “GAO-03-27,” (Washington, GAO, 2002), 1-22.
67
See CRS Report RL32498, Vision 100: Historical Review of the Century of Aviation
Reauthorization Act (P.L. 108-176), by Bart Elias, John W. Fischer, and Robert S. Kirk.
68
Vision 100 did allow for use of AIP formula funds for the replacement of baggage
conveyor systems, and the reconfiguration of terminal baggage areas, necessary to install
bulk explosive detection devices. Such use, however, has been specifically prohibited each
year by appropriators in the legislative language for Grants-in-Aid for Airports in recent
transportation appropriations acts.
CRS-26
Congressional Issues69
There is little disagreement at the national level among the airport interests, the
airlines, general aviation interests, the military, or within Congress that a strong
national network of airports is in the national interest. However, views of how to
best support the national airport system can vary greatly from group to group
depending on the issues involved. A related issue is the appropriate degree of federal
participation in airport development and finance.
By statute, the safe operation of airports is the highest aviation priority. Other
priorities include increasing capacity to the maximum feasible extent, minimizing
noise impacts, and encouraging efficient service to state and local communities (i.e.
support for general aviation airports). These priorities along with the assessment of
airport capital needs and the availability of budgetary resources for AIP all influence
the scope and structure of the program.
During the FAA reauthorization debate in the 110th Congress, virtually all of the
policy issues and options concerning AIP will be influenced by the broader budget
issues of the adequacy of aviation trust fund revenues and the availability of money
from the Treasury general fund. If AIP funding is increased significantly, the
program may well remain basically as it is. If AIP’s funding is reduced, the funding
formulas and project eligibility requirements might be altered to assure that the AIPs
statutory priorities can still be met at the lower funding levels.
Because this report is about an existing program, the analysis of the program
necessarily discusses the existing programmatic structure and the historical funding
levels of the periods being discussed. Advocates of AIP view the fully authorized
funding of the program as a good thing. Over time, however, there has also been an
alternative view, that too much was being spent on AIP, particularly at smaller
airports that do not play a significant role in commercial aviation. These critics often
view the breadth of AIP spending, decreasing local share requirements, and everwidening project eligibilities as allowing for spending that is increasingly inefficient,
unfocused, and of questionable federal purpose.
Airport Capital Needs Assessments
The debate over the scope of airport capital needs is of concern to Congress
because a reliable assessment of needs can help facilitate determining the appropriate
federal support needed to foster a safe and efficient national airport system.70 The
federal government’s interest in the needs debate is broader than just dealing with
capacity constrained airports. It also deals with implementing federal safety and
noise policies.
69
See CRS Report RL33698, Reauthorization of the Federal Aviation Administration:
Background and Issues for Congress, coordinated by Bart Elias, which includes a summary
of AIP issues for Congress.
70
See FAA, NPIAS (2007-2011).
CRS-27
Views on the scope of airport capital needs vary among airport stakeholders.
Historically, air carriers preferred that federally supported capital projects be
restricted mostly to airside capacity enhancing projects.71 Airports generally view
their capital needs within the context of the business needs of the airport’s operations
as a whole (i.e. airside, landside, as well as some off-airport access projects). The
FAA view is from within the more limited context of the NPIAS, the national plan,
that is used by FAA management to administer the AIP and, therefore, is focused
more narrowly on AIP eligibility as the primary criterion for making its capital needs
assessments.
Both the FAA and the Airports Council International-North America (ACI-NA)
have projected different long-term airport financial needs. In the most recent NPIAS
report, the FAA has estimated that the national system’s capital needs for 2007-2011
will total $41.2 billion (an annual average of $8.24 billion).72 The ACI-NA capital
needs survey resulted in an estimate of $87.4 billion for 2007-2011 (an annual
average of $17.4 billion).73
The studies’ differing conclusions are the result of a number of factors,
including a difference in collections periods and an inflation adjustment in the ACINA study. Although these differences may somewhat limit the comparability of the
two estimates, the main reason for the widely differing estimates is the differing
views on what kinds of airport projects were appropriate to include in the estimates.
The NPIAS report was based on planned project information taken from airport
master plans and state system plans. FAA planners screened out projects that were
not justified by aviation activity forecasts or that were not eligible for AIP grants.
Only designated NPIAS airports were included in the study. Implicit in this
methodology is that the planning has been carried through to the point where
financing is identified. Not all projects used to develop the NPIAS estimates are
actually completed, however. Economic conditions, the financial conditions in the
aviation industry, constraints on federal funding, and, on a project-by-project basis,
legal challenges, can prevent the completion of some projects or delay them beyond
the range of years covered in the NPIAS estimates. Some observers argue that the
71
As of this writing, the Air Transport Association, which represents the major air carriers,
has not done an estimate of airport capital needs for the upcoming 2007 FAA
reauthorization debate. However, during the 1996 reauthorization debate the airlines
estimated the annual airport capital needs at $4 billion. This was significantly less than the
FAA estimate of $6.5 billion and much less than the airport estimate of $10 billion per year.
A GAO study, concluded that the widely differing estimates were primarily a result of
different views on what kinds of projects and airports to include in the estimates. See GAO,
Airport Development Needs: Estimating Future Costs. April 1997, GAO-RECD-97-99, 38
p.
72
The five year total is $1.7 billion higher than the estimate in the previous NPIAS (20012005).
73
Airports Council International, Airport Capital Development Costs: 2007-2011,
[http://www.aci-na.org/static/entransit/Airport%20capital%20development%20costs.pdf].
CRS-28
NPIAS under estimates AIP eligible needs because not all such needs will be in the
current airport plans.74
The ACI-NA study reflects the broader business view of major airport operators
and casts a substantially broader net, including non-AIP funded projects (funded by
PFCs, bonds, or state/local funding); airport-funded air traffic control facilities;
airport or TSA funded security projects; “necessary” AIP-ineligible projects such as
parking facilities, hangars, revenue portions of terminals, off-airport roads/transit
facilities; and AIP-eligible projects not reported to FAA in the belief that there would
be a low probability of receiving additional AIP funding.75 Because the $17.4 billion
is based on “proposals” for airport development projects, some would argue that this
figure is high because it reflects wants rather than needs and includes projects that
may never be completed.
Views of the Adequacy of Funding Availability . The ACI-NA and the
FAA also disagree on the adequacy of funding. The 2007-2011 NPIAS report finds
that recently “together, AIP grants and PFC collections account for about 40 percent
of annual U.S. airport capital spending needs. Historically the combined resources
have been adequate to achieve needed development.”76
The amount made available for FY2007 for AIP was $3.515 billion. This would
be 42% of the $8.24 billion average annual needs estimated in the 2007-2011 NPIAS.
Calculating this funding level against the average annual ACI-NA derived level of
$17.5 billion produces a percentage of 20% of all funding sources (should all “needs”
be met).
It is important to keep in mind that AIP is only one source of funding for airport
capital projects. Airport Bonds are the largest source of funds for airport capital
needs, often totaling more than AIP and PFC awards combined.77
The estimates are important because the primary AIP reauthorization issue is the
program’s appropriate level of funding. Because the ACI-NA airport needs
projection includes much that is not eligible for AIP grants, its accuracy may not be
as critical to policy makers considering AIP funding as the NPIAS projections. On
the other hand, the broader ACI-NA estimate may be more significant to bonding and
PFC policies, since these sources fund a broader range of projects than AIP.
74
In the Dept. of Transportation Inspector General’s November 15, 2006 report, Top
Management Challenges: Department of Transportation, the discussion of keeping planned
short- and long-term aviation capacity enhancing initiatives on schedule shows in tabular
form that of the six major new runway projects underway in September 2006 only two were
listed in the 2001 Operational Evolution Plan.
75
ACI-NA. Airport Capital Development Costs: 2007-201, Washington, ACI-NA, 2007.
22 p.
76
NPIAS:2007-2011, 56. Counting all five sources of airport funding.
77
See GAO, Airport Finance: Observations, GAO-07-885, Appendix I,
CRS-29
Airport Capacity Needs at the 35 Busiest Airports.78 In March 2004,
FAA Administrator, Marion C. Blakey, stated that the agency’s goal was to improve
the overall capacity at the top 35 U.S. airports by 30% over a ten year period. These
airports account for about 73% of commercial passenger boardings. The FAA’s
Operational Evolution Plan (OEP, recently also referred to as the Operational
Evolution Partnership) is intended to increase the capacity and efficiency of the
National Airspace System (NAS) over a ten-year period to keep up with the expected
growth in demand for air travel and air cargo. The plan focuses on “infrastructure —
primarily new runways — and technological and procedural initiatives at the top 35
airports.”79 The focus on runways is based on estimates from 2004 Airport Capacity
Benchmark Report data that the 12 OEP airports planning new runways would
achieve an average capacity increase of 31%. This would be a much larger
improvement than the expectation that technology enhancements could net of 3% to
8%.80
The June 2004 FAA study of airport capacity, Capacity Needs in the National
Airspace System: an Analysis of Airport and Metropolitan Area Demand and
Operational Capacity in the Future, first examined which of the 35 OEP airports
would and would not be able to meet future demand, and then examined whether
other areas of the United States might be unable to accommodate the demand for air
transportation in the future. The study examined airports that would need capacity
increases (mostly new or reconfigured runways) from a base year of 2003 and also
projected which airports would need capacity increases in 2013 and 2020. It
identified five airports plus the Atlanta metropolitan area that needed additional
capacity in 2003. The study projected that, assuming that planned OEP
improvements for 2003-2013 were completed, capacity improvements would be
needed at 15 airports for 2013. For the year 2020, assuming implementation of
runway construction project not included in the OEP, as well as improvements in
technologies and procedures (an ambitious assumption, the study notes), the study
still identifies 18 airports as likely needing additional capacity (some not currently
part of the OEP).81
Interestingly, the airports identified for 2013, and especially for 2020, show
increased needs at some medium hub airports that are considered secondary to large
hub airports in major metropolitan airports. Part of this trend may be that some
major metropolitan airports are approaching the point that they may have limited
room to add new runway capacity but could also result from the expansion of
secondary metropolitan area airports that have found favor with low cost air carriers
78
For a broad discussion of aviation congestion issues, see CRS Report RL32707, Avoiding
Gridlock in the Skies: Issues and Options for Addressing Growth in Air Traffic, by Bart
Elias.
79
FAA and Mitre, Capacity Needs in the National Airspace System. See also FAA,
Operational Evolution Plan, 2005-2015: Executive Summary; Version 7.0, (Washington,
FAA, 2005) 24 p.
80
See CRS Report RL32707, Avoiding Gridlock in the Skies: Issues and Options for
Addressing Growth in Air Traffic, by Bart Elias.
81
Capacity Needs in the National Airspace System, I-X.
CRS-30
in recent years. This also could reflect a shift to more point-to-point service and a
somewhat diminished reliance on the hub-and-spoke model by the legacy carriers.82
If valid, the study has implications for AIP within the context of reauthorization.
To begin with, although the life cycles of FAA authorization bills are usually only for
two to four years, large runway projects, that are the focus of the OEP, can require
long lead times (10 or more years from concept to initial construction is not unusual).
Because of this, some costs from projects needed by 2013 and even 2020 may need
to be funded in the next few years. At large and medium hub airports, runway
projects are usually paid for, in part, by AIP funds (there is a 75% maximum
participation: at large airports the participation, however, is generally significantly
below this maximum). These funds are generally used in combination with other
sources of funding such as PFCs, tax-free airport bonds (often paid for using PFC
revenues), airport revenues, and sometimes state funds.
As mentioned earlier, most large and medium airports impose PFCs on each
boarding passenger. In return for permission to levy the PFC, these airports forgo
either 50% or 75% of their AIP formula entitlement funds. This means that federal
funding for major runway projects at large and medium hub airports will probably
need to be, for the most part, funded with AIP discretionary funds. The pool of
discretionary funds is primarily the remainder of provided annual funding after the
entitlement formula requirements are satisfied. Of the forgone PFC funds, 87.5% are
reserved for a small airport fund and are also not available for OEP airports.
If there is a confluence of a policy of overall federal budget deficit reduction
with an inability to either increase trust fund revenues or to increase the general fund
share for the FAA budget, there could be a meaningful reduction in the amount of
funding available for discretionary grants once the entitlement (i.e. formula) funding
requirements are satisfied. In other words, if the AIP budget is constrained, either
under a reauthorization bill or during the annual appropriation process, and the
entitlement formulas remain as they are, the squeeze-down effect will be likely on the
discretionary portion of the AIP budget.
Within this context, it is important to also keep in mind that a significant portion
of AIP discretionary funds have, in recent years, been earmarked to hundreds of
airports, based primarily on local needs and wants rather than in accordance with a
national capacity plan. This situation could also limit or reduce AIP participation in
some of the capacity increasing projects at OEP airports.
Caveats. Predicting the future is difficult and, although the FAA has a
reasonably good record for accuracy in its activity forecasts, the FAA itself has
pointed out that since the events of 9/11 the instability of the industry has led to
82
Some have argued that, because some of the large airports, included in the OEP 35, have
been losing market share to low-cost secondary airports in their urban areas, it might make
more sense, in these cases, to consider increasing AIP funding to these secondary airports
rather than supporting major capacity enhancement projects or airside reconfigurations at
“legacy airports.” Discussed during session “Effects of Airline Restructuring on Airport
Systems,” at the 2007 Transportation Research Board 86th annual meeting, Washington,
January 23, 2007.
CRS-31
larger errors in the agency’s short-term forecasts.83 The recent unpredictability of
fuel prices, a major component of aviation business costs, also brings a degree of
uncertainty to aviation forecasts. In addition, trends in business jet use and the
potential impact of very light jets (VLJs), discussed later, may also influence the
accuracy of forecasts.
AIP’s Financial Future Under an Uncertain Budgetary Outlook
The AIP is a good example of how broader budget issues can have implications
for not only a program’s funding level but also the program’s scope and benefit
distribution. Should ample revenues be available, the reauthorization of AIP could
likely maintain the programmatic status quo with relatively few changes to the
program’s structure, although project eligibility criteria could be broadened. Given,
however, the recent decline in the uncommitted balance of the aviation trust fund,
for the AIP to grow substantially some observers expect that something will have to
change in the budgetary environment. Increased tax revenues (either through new
taxes, higher fares, or faster economic growth) or an increase in the general fund
share would be needed to provide for an AIP increase on the order of the increases
initiated by AIR21and maintained in Vision 100.84 Otherwise, any AIP increase
would have to come at the expense of other FAA programs.
For a variety reasons, some within the transportation community expect
budgetary constraints will restrict the size of the AIP budget. As mentioned earlier,
the uncommitted balance in the trust fund is much smaller than it was during the last
authorization cycle. More money may be needed to fund the F&E component of the
FAA budget to support the modernization of the air traffic control system under the
Next Generation Air Transportation System (NGATS) and, in a constrained
budgetary environment, this could exert downward pressure on the AIP component
of the FAA budget. The enforcement of pay-as-you-go rules and a renewed
commitment to reduce the federal budget deficit could also make it difficult to
increase AIP funding.85 In recent years, the George W. Bush Administration, and the
FAA itself, have consistently proposed AIP budgets significantly below the
program’s authorized levels. Most recently, the President’s FY2009 budget proposed
$2.75 billion for AIP. This is $765 million below the estimated amount made
available for FY2007 and nearly $1 billion below the FY2007 funding authorized in
Vision 100.
Within a constrained-budget scenario, interest would probably increase in such
issues as defederalization of the larger airports which, by allowing them to opt out
of the AIP program, could reduce AIP spending on large hub airports. Another
possibility would be to make the AIP formulas more restrictive. Project eligibility
criteria could also be tightened. Perhaps the greatest concern, at the federal level,
83
FAA Aerospace Forecast Fiscal Years 2006-2017, p. 51.
84
As mentioned earlier in this report, the FY2001 increase in the AIP budget under AIR21
was a 70% increase over the FY2000 amount made available.
85
See CRS Report RL32835, PAYGO Rules for Budget Enforcement in the House and
Senate, by Robert Keith and Bill Heniff Jr.
CRS-32
may be the availability of AIP discretionary funds for major capacity enhancing
projects as those set forth in the OEP.
AIP Spending “Guarantees”86
As discussed earlier, congressional concerns, especially among transportation
authorizing committee members, that aviation trust fund revenues first be used to
fund FAA’s two capital programs (AIP and F&E), before being drawn down to pay
for the agency’s operations activities, have led to the enactment of a series of “cap
and penalty” and other so-called spending “guarantee” mechanisms. Although the
various “cap and penalty” mechanisms, that were in place prior to passage of AIR21
in 2000, succeeded in restricting spending from the aviation trust fund on operations,
they did not consistently succeed in forcing full appropriation of authorized AIP and
F&E funding levels.87 This situation led to the growth of the trust fund’s
uncommitted balance. As a Congressional Budget Office (CBO) report explained in
1988, but still applicable today,88
Primarily because of program constraints, these provisions have merely altered
the accounting for aviation spending, forcing the general fund to finance more
of these expenditures.... In addition, there still remains an incentive to limit
capital spending for aviation programs. Given the annual level of excise tax
revenue from aviation, each dollar of aviation spending greater than these tax
revenues must be funded by general revenues. Therefore, regardless of the actual
accounting for aviation spending, each dollar reduction in spending on aviation
either reduces the need for the general fund to finance aviation spending, or
produces a trust fund surplus from which the Treasury can borrow to cover nonaviation expenditures.
In effect, within the context of the unitary federal budget, appropriators and
budgeteers were more concerned about the overall budget level or the size of the
federal budget deficit than whether below-authorized spending on AIP and F&E
caused a reduction of trust fund spending for O&M. Broader budget concerns
trumped the cap and penalty provisions.
Current Law: Point-of-Order Enforced Spending Guarantees. There
are two existing spending guarantees which are different than the previously
discussed cap and penalty provisions. One makes it “out-of-order” in the House or
Senate to consider legislation that failed to use all aviation trust fund receipts and
interest annually. The second makes it out-of-order to consider any bill that provided
any funding for RE&D or O&M if it failed to fully fund the FAA’s two capital
86
For a detailed discussion of the history of funding guarantees, see CRS Report RL33654,
Aviation Spending Guarantee Mechanisms, by Robert S. Kirk. The spending guarantee
issues are also summarized in CRS Report RL33698, Reauthorization of the Federal
Aviation Administration: Background and Issues for Congress, coordinated by Bart Elias.
87
The cap set a ceiling on the amount of aviation trust fund money that could be used to
fund FAA operations. The penalty would reduce this cap by a formula linked to FAA
capital program appropriations shortfall below their authorizations for the fiscal year.
88
CBO. Status of the Airport and Airway Trust Fund: 1988. p. 10-11.
CRS-33
programs, AIP and F&E, at their authorized levels. As a penalty of sorts, any failure
to fully fund F&E would lead to an increased appropriation (referred to as “pop-up”
budget authority) for AIP equal to the appropriations shortfall for F&E.
During the first years of the AIR21 guarantees, FY2001-FY2003, these
measures appear to have successfully assured that both AIP and F&E were funded
at or very near their authorized levels in the annual appropriations acts. However,
congressional support, in the annual appropriation bills, for adherence to the
guarantees during the last three years has been mixed. On the one hand, the
obligation limitations for AIP for FY2004-FY2007 have been reasonably close to
their authorized levels for these years. On the other hand, F&E spending has been
cut significantly in each of these years. F&E’s annual appropriation fell below its
authorization as follows: $320 million for FY2004; $468 million for FY2005; $498
million for FY2006; and $595 million for FY2007. These F&E funding levels were
out of conformance with the guarantees and should have made the funding of the
O&M and RE&D components of FAA’s budget out of order during these years. It
also should have led to additional “pop-up” budget authority for the AIP equal to the
annual underfunding of F&E.
There are a number of reasons that the guarantee provisions have not been
adhered to. Specific to F&E spending has been the lack of confidence in Congress
in the ability of the FAA to oversee the national air system modernization. The
hesitance to fully fund F&E may have more to do with this than with resistance to
adherence to the funding guarantees. However, some other weaknesses in the
current guarantee mechanism have manifested themselves in recent years. Spending
guarantees that are enforced by point-of-order actions only work if the point-of-order
is raised by a Member and if they have not been waived by rule. In the House, recent
annual appropriations bills have had all points-of-order waived by the Rules
Committee. Senators have also chosen not to raise points-of-order against violations
of the AIP and F&E funding guarantees.89 Points-of-order have not been allowed on
appropriations bill conference reports. Also the “pop-up” AIP budget authority,
which some viewed as part of the mechanism for preventing appropriators from
spending any F&E shortfall for noncapital aviation spending, can and has been
rescinded in recent appropriations legislation. These rescissions allow appropriators
to bring down the nominal total cost of the Transportation/Treasury Appropriations
bills, generally in the following budget year. As was true during the cap and penalty
era (FY1977-FY1998), the current spending guarantees can still be trumped by
broader budget policy goals (such as deficit reduction) or, at times, by the spending
priorities of appropriators.
Spending Guarantee Options. Aviation funding guarantees are expected
to be considered in the FAA reauthorization debate during the 110th Congress and
could include keeping the current system, modifying the current guarantees,
89
In part, this may have been because, if a point of order were upheld, the entire AIP or F&E
financing provision would be stricken from the bill that Senate conferees would take to
conference. This absence of a funding provision could put the Senate conferees at a
disadvantage in negotiating with House conferees over the contents of the bill to be voted
out of conference.
CRS-34
resurrecting a mechanism analogous to the cap and penalty provisions, reconsidering
taking the trust fund “off-budget,” or erecting budgetary “fire walls” as was done for
the highway and transit programs in 1998. Some would argue that there should be
no guarantees and that the normal congressional budget process should be allowed
to progress unfettered. The absence of a large uncommitted trust fund balance could
also have an impact on the support for new or continued aviation spending guarantee
mechanisms during FAA reauthorization in the 110th Congress.
Partial Defederalization
One way to reduce the amount of trust fund revenue needed for AIP would be
to allow large and medium hub airports to opt out of the AIP program in favor of
unrestricted or higher PFC financing. This would, in the view of some airport
executives, also give them the flexibility they would prefer to have in managing their
airports. These airports would no longer be bound by all of the grant assurances that
are currently required of participants.
If the large and medium hub airports are able to defederalize, there would be
implications for the degree of policy influence the federal government could wield
in airport development. Some argue that, because the threat of withdrawal of federal
AIP funds provides the federal government with substantial leverage to enforce grant
assurances that implement federal policy (for example, the “fair and reasonable rates”
requirement or airport revenue diversion assurances), other means of maintaining
federal influence might be considered during reauthorization should defederalization
gain significant legislative attention.
Privatization
For Congress the privatization debate is both about saving money on airports
that can be less dependent on federal assistance and also, in the broader sense,
whether federal involvement in airport infrastructure is excessive. Airport
privatization differs from defederalization in that privatization denotes a change in
ownership from a public entity to a private one. Airport privatization in the United
States has, for the most part, been limited to what some would refer to as
commercialization of airport management or services. The use of private companies
to provide airport services is widespread. At the largest airports in the United States
employees of private companies — the airlines, concessionaires and other contractors
— account for 90% of all employees.90
The Airport Privatization Pilot Program (49 U.S.C. sec. 47134; Section 149 of
the Federal Aviation Reauthorization Act of 1996, P.L. 104-264), authorizes the FAA
to exempt up to five airports from certain federal restrictions on the use of airport
revenue off-airport. Participating airports may be exempted from such requirements
as repayment of federal grants. Privatized airports may still participate in the AIP,
but at a lower federal share (70%). During the nine years since the application
procedures were published only one airport, Stewart International Airport in New
90
NCARC. Development Needs and Financing Options, p. 13.
CRS-35
York, has obtained an approved exemption.91 In January 2007, however, the British
lease holder, National Express Group Plc, agreed to sell the operating lease (which
has 93 years remaining) at Stewart International to the Port Authority of New York
and New Jersey, for $78.5 million. National Express had bought the lease for $35
million in 2000. This means that the only successfully privatized airport under the
Airport Privatization Pilot program is returning to public sector control.92 The case
can be made that neither the repurchase of a privatized airport by a public airport
authority, nor the quick resale at a significant profit of a long-term airport lease of an
airport built with public funds, was what some supporters had in mind when they
supported the privatization program.
Recently the discussion of airport privatization has taken place within the
context of the recent leasing agreements of the Chicago Skyway toll road and the
Indiana toll road to private investors. The Skyway sale was especially controversial
because the money payed to the City of Chicago was used by the city to defray
normal city budgetary expenses and not to support or improve transportation
infrastructure. On September 14, 2006, the City of Chicago submitted a preliminary
application under the Airport Privatization Pilot Program for the long-term lease of
Chicago Midway Airport, and on October 3, 2006, the FAA authorized the City of
Chicago to select a private operator, negotiate an agreement and submit a final
application under the pilot program.93 Chicago Midway has received $371 million
in federal (AIP) grants since 1982. Some observers of Chicago’s Midway Airport
lease proposal have described it as a “value extraction” proposal because they expect
that the lease payments would be simply used as general City revenue and would not
add value (i.e. make improvements) to the airport or to any transportation
infrastructure.94 Supporters of privatization generally take the view that, if lease
revenues or profits from airport sales can only be used for airport purposes, there is
no incentive for an airport authority to sell or a for-profit company to purchase an
airport or airport lease.
As mentioned earlier, the pilot program provides for exemptions on the AIP
grant assurance restrictions on use of revenues. The Airport Privatization Pilot
Program, however, requires that the airport sponsor may only recover from the sale
or lease the amount that may be approved by at least 65% of the air carriers serving
the airport; and air carriers that account for 65% of the total landed weight at the
airport for the year. Proponents of privatization argue that this requirement of air
carrier approval (air carriers have historically not favored privatization) of the use of
airport revenue off-airport or into a city or county budget, as a major reason there has
been limited interest in the privatization pilot program. Given the limited success of
91
The owner of the 99 year lease at Stewart Airport, the United Kingdom-based, National
Express Group (NEG), has announced that the remainder of its lease will be put up for sale.
NEG held the lease for seven years.
92
Joe Mysak, “Airport Privatization,” Pittsburgh Tribune Review (February 4, 2007).
93
See FAA, “Fact Sheet: Chicago Midway Airport Pilot Privatization Program,” FAA News,
April 2008.
94
Government Accountability Office, “Financing Airport Capital Development: a
Roundtable Discussion,” Meeting held January 27, 2007.
CRS-36
the Airport Privatization Pilot Program, Congress may wish to modify, replace or
eliminate the program.95
There is no certainty that any AIP cost savings from either privatization or
defederalization would be retained as AIP funds for use by the remaining airports.
AIP spending is determined by the authorization and appropriations process and there
is no guarantee that the savings would be made available to the remaining eligible
airports. Any savings could also be used to lower the program size, to marginally
assist in deficit reduction, to lower the needed general fund payment, or to make
money available for spending elsewhere.
Apportionment and Eligibility Changes
Apportioned funds (sometimes referred to as entitlements) were substantially
increased in AIR-21 and the range of land-side projects eligible for AIP grants was
increased somewhat in both AIR-21 and Vision 100. Most of the eligibility changes
benefitted airports smaller than medium-hub size. Although the increase in
apportioned funding and the broadening of eligibility criteria could continue in the
next reauthorization bill, if the budget environment is constrained the opposite could
happen. In particular, the apportioned funds may have to be reduced to assure that
sufficient funds remain to fund discretionary grants (in particular for operational
evolution plan projects). The ACI-NA supports the maintenance of AIP funding for
smaller airports and argues further for giving these airports increased flexibility in the
use of their entitlements. The case can be made that, over the years, the broadening
of AIP eligibility at small airports has made it increasingly difficult to identify the
federal interest that has been met by such spending. As mentioned earlier, air carriers
are skeptical of the benefit to the national airport system of some proposals seeking
to broaden project eligibility, in part because they feel it shifts spending away from
airside projects at large airports and to projects at small airports that do not play a key
role in commercial aviation. General aviation and small airport supporters defend
the distribution of AIP funds to small airports, noting that smaller airports are more
dependant on AIP and do not often have the access to the bond market that larger
airports have. In addition, they stress the importance of small airports to broad
regions of the United States and their role in fulfilling the national goal of having an”
extensive” national airport system.96
Federal Share
Vision 100 raised the federal share from 90% to 95% for smaller than large and
medium-hub airports and for airports in states participating in the state block grant
program, but included a sunset clause that returns the federal share back to 90% after
95
See Robert W. Poole, Jr, “U.S. Airport Privatization, the Second Time Around,” Airport
Policy News, no. 23, (February 2007), 4-5. The issues were also discussed at the GAO
roundtable, Financing Airport Capital Development.
96
NPIAS, 4. The NPIAS includes the attribute that “ the airport system be extensive,
providing as many people as possible with convenient access to air transportation, typically
by having most commuters with no more than 20 miles of travel to the nearest NPIAS
airport.”
CRS-37
FY2007. Should the federal or FAA budget be constrained or held at current levels,
Congress may wish to consider adjusting the federal share as either a cost cutting
measure or to encourage more local financial participation. The federal share for
most projects at large and medium-hub airports is 75%. Those who favor a
significant local matching share in federal transportation projects generally argue that
it helps prevent the construction of projects of questionable value that may be built
only because federal funds may be obtained at little cost to local governments or
airport authorities. Some also argue that a high federal share discourages local
government financial participation and makes smaller airports less interested in
seeking funds through the bond market.
Discretionary Fund Set-Asides
The discretionary funds (which are the remainder funds after the apportionments
are satisfied) are subject to set-asides for noise mitigation, the Military Airports
Program (MAP), reliever airports, and the capacity/safety/security/noise set-aside.
Any of these could be modified during reauthorization. However, the greater the
total of all the set-asides, the smaller the remaining amounts that are truly
unrestricted discretionary funds. Some observers argue that this could limit the
ability of the FAA to respond to national aviation priorities, such as the OEP.
Minimum Discretionary Fund
49 U.S.C. 47115 requires that a minimum amount ($148 million plus any
outstanding pre-January 1, 1997 letters of intent) remains available for the
discretionary fund after all apportionments and set-asides are satisfied. If less money
remains, the apportionments are reduced pro rata to bring the discretionary funding
up to the required level. Because AIP has been funded since FY2001 at historically
high levels, the minimum discretionary fund provision has not been a factor in AIP
funding. If, however, AIP’s budget is reduced substantially or if the entitlements are
increased substantially, the appropriate minimum discretionary fund level may need
to be reconsidered.
Grant Assurances
As mentioned earlier, along with the acceptance of AIP funds come certain
obligations (generally referred to as assurances) that airports must agree to. These
assurances include the obligation to maintain and operate their facilities safely and
efficiently, as well as more specific obligations such as not to discriminate against
any class of air system users,97 to adhere to “Davis-Bacon” prevailing wage
requirements, and to use airport revenue solely for spending on airport operations and
capital costs.98 Proposals to alter the AIP grant assurances can be expected to arise
during the reauthorization debate. For example, the ACI-NA is seeking a bill that
“simplifies airport grant assurances including reforms that permit airports to use nonaeronautical revenue sources to attract new and competitive air service to their
97
For example, against cargo or commuter aircraft, or night time flight operators.
98
49 U.S.C. sec. 47107.
CRS-38
communities.”99 Supporters of maintaining the grant assurances generally argue that
the assurances not only help establish and enforce federal policy priorities but also
insulate airports from local efforts to limit or shut down airport operations (for
example, because of noise concerns or for land development).
Noise Mitigation
Historically, the basic funding issue is whether to change the existing
discretionary fund noise set-aside. The noise set-aside, however, has been raised in
each of the last two reauthorization acts and is now 35% of discretionary funding.
Although some support for another increase could develop, it would likely face
resistance from proponents of spending on capacity and safety enhancing projects
that also rely on AIP discretionary spending. This scenario would change should the
aviation trust fund revenue outlook improve enough to allow for a significant
increase in AIP funding.
Other noise issues that may arise are funding eligibility issues. One issue is
whether FAA should be granted the flexibility to fund some noise mitigation projects
that are outside the 65 decibel noise impact area. Supporters argue that, at some
airports expanding noise mitigation to areas subject to slightly lower than 65 decibel
impact could significantly lower local resistance to airport projects. Some air carriers
and airports, however, are concerned that any lowering would eventually, in effect,
be applied nation-wide and the resulting demand for AIP funds would divert
resources from capacity and safety projects. Another issue is whether or not to make
the planning for noise mitigating arrival and departure operational (air traffic control)
procedures eligible for AIP funding. In what was a major expansion of AIP noise
funding eligibility, Vision 100 authorized the FAA to make grants for land use
compatibility planning and projects around large and medium hub airports that have
not submitted a part 150 noise compatibility plan (under 14 C.F.R. Part 150), as was
previously required. The provision is limited to grants that are awarded through
FY2007. Congress may wish to review this provision and extend or modify it, or
allow it to lapse.
Very Light Jets (VLJs) and the Airbus A380: Impact on AIP
Some predictions of the rapid growth of a new type of aircraft, the VLJs (jets
with a takeoff weight less than 12,500 pounds that can land on a 3,000 foot runway),
have, in turn led to concerns that increased airport funding will be needed to
accommodate them.100 Even if the optimistic estimates of the speed of introduction
of VLJs pan-out, given that VLJs have been specifically designed to operate at most
existing general aviation airports, existing airport facilities should be able to handle
99
Board of Directors, Airports Council International-North America, The ACI-NA Board of
Directors Endorses an Aviation Reauthorization Program That Includes a Balanced
Financing Program, (Washington, ACI-NA, 2006) 1.
100
For a more detailed discussion of the issues related to the advent of VLJs, see the VLJ
discussion in the chapter “Accommodating Future Airspace Users,” in CRS Report
RL33698, Reauthorization of the Federal Aviation Administration: Background and Issues
for Congress, coordinated by Bart Elias.
CRS-39
the traffic. If, however, the advent of VLJs leads to increasing demands for installing
all weather capabilities at small airports or if insurers place requirements on VLJ use,
for example that VLJs only be used at airports with runways longer than 3,000 feet,
the demand for AIP-funded improvements at small airports could increase over time.
In either case, unless the reauthorization bill covers an unusually long time frame, it
is unlikely that VLJs will be a major AIP concern at this time. As mentioned
previously, small airports are more dependent on AIP funding for their capital
projects than larger airports.
More likely to have an impact on AIP funding in the near term is the Airbus
super jumbo A380. The GAO identified 18 U.S. airports making changes to
accommodate the A380 at an estimated cost of roughly $927 million. These airports
identified AIP as the planned source for 50% of these costs and PFCs for another
21%.101
“Place Naming” in Annual Appropriations Legislation
Historically, Congress has not earmarked AIP funds in the manner typical to
mass transit appropriations where specific projects have specific dollar amounts
designated in the language of the appropriations bills. Instead of earmarking, AIP
funds are subject to “place naming.” Under place naming, the appropriations
committees direct FAA to give priority consideration to discretionary grant
applications at airports named in the appropriations bill report language. The enacted
FY2001 conference agreement (H.Rept. 106-940) place named 158 airports and also
specified dollar amounts to be awarded (totaling just under $300 million). The
language was also more directive than had been the case previously. The report
directed FAA to “provide not less than the following [specified] funding levels, out
of available discretionary resources.” Since then each annual conference report has
named over 100 airports with set dollar amounts. Most recently, the FY2006
Transportation/Treasury Appropriations conference report (H.Rept. 109-307) “place
named” 124 airport for projects totaling just under $196 million. One of the issues
related to this form of earmarking is the impact it has on the grant application
process. Another is the impact of place naming on the availability of limited
discretionary funds for national priorities such as the operation evolution plan (OEP).
For FY2007 the continuing appropriations resolution (H.J.Res. 20) passed the House
free of earmarks or place naming. Place naming of airports for AIP grants, however,
reemerged during the FY2008 appropriations process. The Consolidated
Appropriations Act, 2008 (P.L. 110-161; H.Rept. 110-434) named 110 airports for
projects, totaling just over $99 million.
Passenger Facility Charge Issues
The central PFC issue is whether to raise the $4.50 per enplaned (i.e., boarding)
passenger ceiling or to eliminate the ceiling all together. Airports have long argued
101
U.S. Government Accountability Office, Commercial Aviation: Costs and Major Factors
Influencing Infrastructure Changes at U.S. Airports to Accommodate the New A380
Aircraft, “ GAO-06-571” Washington, DC: GAO, 2006. Available at [http://www.gao.gov/
new.items/d06571.pdf].
CRS-40
for elimination of the cap, but would also be pleased with an increase of some sort.
The overall historical arguments for and against raising or eliminating the $4.50 cap
on passenger facility charges are similar to the current arguments and are similar to
the arguments for and against the PFC in general. Most air carriers and some
passenger advocates will probably oppose an increase in the PFC. The pros and cons
of increasing or eliminating the PFC cap are discussed below.
!
Pro. PFC supporters feel that the PFC is more reliable than AIP
funding. They also argue that PFCs are pro-competitive, helping
airports build gates and facilities that both encourage new entrant
carriers and allow incumbent carriers to expand. Airports also argue
that the PFC has proven an appropriate user fee that has travelers pay
for airport improvements and capacity expansion at the airport where
the fee is collected. In addition, supporters argue that over time the
value of the PFC has been eroded by inflation and an adjustment is
therefore necessary. Airport interests also want even fewer
restrictions on the use of PFC revenue.
!
Con. The airlines object to increasing the PFC cap. They argue that
the PFC is just another head tax.102 They also argue that it is anticonsumer because it increases passenger costs and that, by raising
these travel costs, it could at some point lead to a reduction in
passenger traffic. Airline interests object to what PFCs have been
spent on, arguing that airports have learned to “game the system” to
provide money for marginal proposals of debatable value instead of
high priority projects that offer meaningful safety or capacity
enhancements. The major air carriers are also unhappy with the less
influential decision making role they have in project decisions under
PFCs. Airports only have to consult with resident air carriers under
the PFC rules; they do not have to get air carrier agreement on PFC
funded projects.
Although PFC revenues can be used for a broader range of projects than AIP,
some airport advocates argue there is still room for more flexibility in PFC eligibility
requirements. For example, some would like more freedom to use PFC funds on offairport projects, such as transportation access projects. Airports would also like the
application process to be streamlined. Additionally, they would also to eliminate the
competition plan requirement that is placed on large and medium hub airports that
charge PFCs at the $4.50 level. As mentioned earlier, supporters of the competition
plan provision hoped the requirement would help assure that the major airports
would be available on a reasonable basis to all air carriers wishing to serve those
airports.
Air carrier advocates have expressed concerns about the expansion of project
eligibility under the PFC program. They are especially concerned about the use of
102
Merlis, Edward A. Passenger Facility Charge Increase: Statement on Behalf of the Air
Transport Association of America Before the House of Representatives Aviation
Subcommittee. March 12, 1998. 6 p.
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PFCs to fund certain airport access projects, such as rail mass transit projects, that
would spend PFC revenues beyond the airport boundary. They view the broadening
of PFC project eligibility as shifting resources away from airport infrastructure
projects that support the operation of aircraft at the airport. In their view, this creates
a situation where the airside projects generally favored by air carriers are more likely
to be funded by AIP grants, bonds, and airport revenues and less likely to be funded
with PFCs. Part of this concern is driven by air carrier belief that the broadening of
PFC project eligibility, in effect, makes some large airports more likely to raise the
rates and fees (such as landing fees) charged to air carriers that use the airport.
If the AIP budget faces a period of constraint, which could limit the availability
of AIP discretionary funding for national priorities such as the OEP, Congress may
wish to revisit the distribution of the AIP apportionments that are foregone by the
large and medium-hub airports that impose a PFC. Currently 87.5% of the foregone
funds are directed to a small airport fund and 12.5% to the discretionary fund.
Adjusting these percentages could be one way of increasing the money available to
support OEP projects. In 1990, the Airport Capacity Funding Advisory Committee
recommended that all foregone funds should be “shifted to the discretionary fund and
allocated proportionally across all categories of the discretionary category.”103 This
original recommendation could be reconsidered.
Airport Bonding Issues
Recently, there has been interest in increased use of private activity bonds
(PABs) for transportation development. Private activity airport bonds could allow
a private entity to enter the tax-exempt bond market to raise funding for a capital
project at a public use airport. As a possible precedent, the recently passed surface
transportation act, the Safe, Accountable, Flexible, Efficient Transportation Equity
Act: a Legacy for Users (P.L. 109-59; SAFETEA-LU), allowed for up to $15 billion
in private facility bond funding for highways or freight transfer facilities.104
Airport bonds, however, have long been a major source of funding for capital
projects at primary airports. Because most airports are owned by public authorities,
they can seek funds in the tax-exempt bond market. The majority of these bonds are
already treated by the Internal Revenue Service as private activity bonds because they
fund projects that benefit the activities of private entities (usually airlines at the
airport) and because they directly or indirectly (through fees) depend on revenue from
such private entities to make the bond payments. Income from PABs are subject to
the alternative minimum tax.
The current use by airport sponsors of airport bonding differs somewhat from
the use of PABs envisioned in SAFETEA-LU. Many of the supporters of the
SAFETEA-LU provisions envisioned PABs as a means of facilitating public-private
partnerships between the public authority and an outside investor (see the
103
FAA, Report of the Airport Capacity Funding Advisory Committee (Washington: FAA),
p. 3.
104
For a description of the Federal Highway Administration program, see [http://www.fhwa.
dot.gov/ppp/private_activity_bonds.htm].
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privatization issue discussion earlier in this report). Within the airports context, this
would be analogous to an airport authority agreeing to a long term lease with an
outside private investor who would have the ability to enter the market for taxexempt bonds to finance improvements at the airport and, perhaps, also to finance the
purchasing costs of the lease itself.105
Alternative Minimum Tax (AMT) Issues. As mentioned above, income
from PABs is subject to the AMT.106 Income from tax-exempt governmental purpose
bonds is not subject to the AMT (the majority of airport bonds are PABs). One
change sought by ACI-NA would be to broaden the definition of governmental
purpose airport bonds to, in effect, include either all airport bonds or at least those
bonds issued for public use projects that meet AIP or PFC eligibility requirements.107
Opponents of such changes express concerns that these changes could reduce
U.S. Treasury revenues. Some also argue it would make more sense to change the
AMT as part of a tax bill rather than as a specific exemption provided for income on
airport bonds in an FAA reauthorization bill. In either case, such a change would not
be under the jurisdiction of the congressional committees that will have jurisdiction
over most reauthorization provisions. Changes to the AMT would be under the
jurisdiction of the congressional tax-writing committees, the House Committee on
Ways and Means and the Senate Committee on Finance.
The Congressional Budget Office (CBO), the Office of Management and Budget
(OMB) and the Treasury Department, however, have generally opposed bonding as
adding additional government-borne costs to the airport improvement process.108
105
See also the discussion of privatization of airports earlier in this report.
106
The AMT was originally enacted to make sure that all taxpayers pay at least a minimum
amount of federal taxes on their income so that individual taxpayers could not take unfair
advantage of the various federal tax preferences and incentives. Because the tax was not
indexed for inflation the impact of the tax has grown beyond the small group of tax payers
for whom it was originally intended. See CRS Report RL34382, The Alternative Minimum
Tax For Individuals: Legislative Activity in the 110th Congress, by Steven Maguire and
Jennifer Teefy.
107
ACI-NA, Reforming the Federal Tax Treatment of Airport Bonds, (Washington, ACINA) 2006. The ACI-NA also proposes that the advance refunding of PABs (which is
usually done to take advantage of lower interest rates) be allowed.
108
CBO reiterated this position at recent (September 27, 2006) House Aviation
Subcommittee hearings on Financing Options for FAA and Redesign of the Air
Transportation System. GAO also expressed the reasons for its concerns about the costs of
bonding. See GAO. National Airspace System Modernization: Observations on Potential
Funding Options for FAA and the Next Generation Airspace System. “GAO-06-1114T”
Washington, GAO, 2006. p. 16-17.
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Appendix A. Legislative History
of Federal Grants-in-Aid to Airports
Prior to World War II the federal government limited its role in aviation to
maintaining the airway system, viewing airports as a local responsibility. Some
federal monies were spent on airports during the 1930s (about $150 million) but only
as part of federal work relief activities such as Works Progress Administration
(WPA) projects. The national defense need for a strong system of airports during
World War II led to the first major federal support for airport construction. After the
war, the Federal Airport Act of 1946 (P.L. 79-377, hereafter referred to as the 1946
Act) continued federal aid under the Federal Aid to Airports Program, although at
lower levels than during the war years. Under the 1946 Act, funds were appropriated
annually from the general fund of the U.S. Treasury. Initially much of this spending
supported a policy of conversion of military airports to civilian use. In the 1960s
substantial funding also went to upgrade and extend runways for use by commercial
jets.109 By the end of the 1960s, congestion, both in the air and on the ground at U.S.
airports, was seen as evidence by some that past federal support for airports had not
been sufficient to maintain adequate airport capacity.110
Airport and Airway Development and Revenue Acts
of 1970 (P.L. 91-258; the 1970 Acts)
In 1970, Congress responded to the congestion problems and capacity concerns
at airports by passing two Acts. The first, the Airport and Airway Development Act,
dealt with the spending side of federal aid to airports. It established the Airport
Development Aid Program (ADAP), the Planning Grant Program (PGP), and set
forth the programs’ grant criteria, distribution guidelines, and authorization of grantin-aid funding for the first five years of the program. The second Act, the Airport
and Airway Revenue Act of 1970, dealt with the revenue side of airport
development. This act established the Airport and Airway Trust Fund (also known
as the Aviation Trust Fund). Revenues from levies on aviation users and fuel were
dedicated to the fund.111 Modeled on the Highway Trust Fund, this fund was
designed to assure an adequate and consistent source of funds for federal airport and
airway programs.112 The Aviation Trust Fund also funds most FAA activities in
addition to grants-in-aid for airports. These include, facilities and equipment (F&E);
research, engineering, development (R,E&D); and FAA operations. Air traffic
109
For a general discussion of the U.S. airport system see Alexander R. Wells, Airport
Planning & Management, (New York, TAB Books, 1992), 1-76.
110
U.S. President (1969-1974: Nixon), Problems of Air Transportation in America:
Message from the President of the United States, 91st Cong. 1st Sess., June 1969,
(Washington, U.S. Govt. Print. Off. , 1969), H.Doc. 91-130, 1-4.
111
112
See CRS Report RS21321, Aviation Taxes and Fees: Major Issues, by John W. Fischer.
Although the Airway and Airport Trust Fund was modeled after the Highway Trust Fund,
there are differences in the way funds are distributed. One major difference is that highway
spending is funneled through the states whereas most airport development funds go directly
to airports.
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system maintenance and improvement fall under the first two of those categories.
Under the 1970 Acts the trust fund was to have been both a capital account and,
when excess funds existed, a user-pay system to help support FAA’s administrative
and operations costs.113
Airport and Airway Development and Revenue Acts
Amendments of 1971 (P.L. 92-174; the 1971 Amendments Act)
The Nixon Administration’s FAA budget requests for FY1971 and FY1972
under the new trust fund system brought it into immediate conflict with Congress
over the budgetary treatment of trust fund revenues.114 The Administration treated
the new financing system as a user-pay system, whereas many Members of Congress
viewed the trust fund as primarily a capital fund for the ADAP and F&E (although
spending on FAA operations was allowable).115 The 1971 Amendments Act was a
strong congressional reaction consistent with many Members’ perceptions that the
Nixon Administration was ignoring the intent of Congress under the 1970 Acts. The
Amendment made the trust fund a capital-only account (although only through
FY1976), disallowing the use of trust fund revenues for FAA operations.116
Airport and Airway Development Amendments Act
of 1976 (P.L. 94-353; the 1976 Act)
The 1976 Act made a number of adjustments to the ADAP and reauthorized the
Aviation Trust Fund through FY1980. The act again allowed the use of trust fund
resources for the costs of air navigation services (a part of operations and
maintenance). However, in an attempt to assure adequate funding of airport grants,
the act included “cap and penalty” provisions which placed an annual cap on
spending for costs of air navigation systems and a penalty that reduced these caps if
airport grants were not funded each year at the airport program’s authorized levels.117
ADAP grants totaled about $4.1 billion dollars from 1971 through 1980. In part
because of a debate over “defederalization,” Congress did not pass authorizing
legislation for ADAP during FY1981 and FY1982, which meant that the Aviation
113
See GAO, Congressional Intent. For another discussion of congressional intent regarding
the debate over the use of aviation trust fund revenues for both airport and airway
infrastructure as well as spending on FAA operations, see CBO. The Status of the Airport
and Airway Trust Fund.
114
See CBO, Status of the Airport and Airway Trust Fund, 3-11.
115
The Administration’s FY1972 budget proposal would have provided more aviation trust
fund monies for FAA operations than for AIP and F&E combined.
116
117
CBO, Status of the Airport and Airway Trust Fund, 5-7.
For a detailed discussion of the history of the various cap and penalty provisions and
other spending guarantees, see CRS Report RL33654, Aviation Spending Guarantee
Mechanisms, by Robert S. Kirk.
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Trust Fund lapsed during those two years, although spending for airport grants
continued.118
Airport and Airway Improvement Act of 1982
(P.L. 97-248; the 1982 Act)
The 1982 Act created the current AIP and reactivated the Aviation Trust Fund.
Although the AIP maintained the ADAP’s approach of using grants-in-aid to support
an integrated national system of airports, it did make some significant changes in the
operation of the program. The program differences included altering the funding
distribution among the newly defined categories of airports,119 extending aid
eligibility to privately owned general aviation airports, increasing the federal share
of eligible project costs, and earmarking 8% of total funding for noise abatement and
compatibility planning. The act also required the Secretary of Transportation to
publish a national plan for the development of public-use airports in the United
States. This biannual publication is called the National Plan of Integrated Airport
Systems (NPIAS). The NPIAS identifies airports that are considered important to
national transportation. For an airport to receive AIP funds it must be listed in the
NPIAS.120 In reauthorizing the Aviation Trust Fund, the act also adjusted the
schedule of aviation user fees.
Although the act was amended often in the 1980s and early 1990s, the general
structure of the program remained the same. The Airport and Airway Safety and
Capacity and Expansion Act of 1987 (P.L. 100-223; 1987 Act) authorized significant
increases for AIP and added a cargo service apportionment. The 1987 Act also
included modified “cap and penalty” provisions as well as a “tax reduction trigger,”
in part, to encourage full funding of AIP at the fully authorized level.121 Title IX of
P.L. 101-508, the Omnibus Budget Reconciliation Act of 1990 (OBRA), included the
Aviation and Airway Safety and Capacity Act of 1990 which allowed airports, under
certain conditions, to levy a Passenger Facility Charge (PFC) to raise revenue and
118
Airport aid for those years was appropriated at $450 million per year. Certain aviation
fee revenues went into the Treasury’s general fund and the Highway Trust Fund during the
lapse. The defederalization debate centered around proposals to withdraw federal aid from
major air carrier airports on the grounds that the federal government was over-involved in
airport development finance and that large airports could finance any needed development
themselves.
119
The 1982 Act defined four categories for the distribution of formula funds: commercial
service, primary, reliever, and general aviation. Of the distribution, not more than 50%was
to primary airports, based on the number of enplanements. 12 % of the authorization was
for use within the states and insular areas and the remainder was defined as discretionary.
A sizable portion of the discretionary funding was dedicated to specified funding minimums.
120
FAA, NPIAS 2007-2011. According to FAA 3,431 (including 67 proposed NPIAS
airports) of the 19,847 airports existing in the United States are listed in the NPIAS. Unless
otherwise stated, the discussion in this paper refers to the NPIAS or “national system”
airports.
121
The 1987 Act added a provision for FY1988-FY1989 that would trigger a reduction in
aviation tax rates, if the total of the amounts made available for AIP, F&E, and R,E&D were
less than 85% of the amounts authorized for these programs.
CRS-46
also established the Military Airport Program (MAP), which provided AIP funding
for capacity and/or conversion-related projects at joint use or former military airports.
The Airport Noise and Capacity Act of 1990, also set a national aviation noise policy.
OBRA included the Revenue Reconciliation Act of 1990 which reauthorized the
Aviation Trust Fund and adjusted some of the aviation taxes. Finally, OBRA again
modified the cap and penalty provisions and eliminated the tax reduction trigger.
The Federal Aviation Reauthorization Act of 1994 (P.L. 103-305) reauthorized AIP
for two more years and again made modifications in the cap and penalty
provisions.122
Federal Aviation Reauthorization Act of 1996 (P.L. 104-264)
The 1996 authorization of the AIP provided $2.28 billion for FY1997 and $2.37
billion for FY1998. The act made a number of adjustments to entitlement funding
and discretionary set-aside provisions. It also included a number of directives
concerning intermodal planning, cost reimbursement rules, letters of intent (LOIs),
and the Small Airport Fund. A demonstration airport privatization program and a
demonstration program for innovative financing techniques were established. The
pilot status of the state block grant program was removed. The 1996 Act again
altered the cap and penalty provisions. The act did not reauthorize the taxes that
supported the aviation trust fund. This was done by the Taxpayer Relief Act of 1997
(P.L. 105-34), which extended, subject to a number of modifications, the existing
aviation trust fund taxes for ten years, through September 30, 2007.
The Wendell H. Ford Aviation Investment and Reform Act
for the 21st Century of 2000 (AIR21, P.L. 106-181)
AIR21’s enactment was the culmination of two years of legislative effort to
pass a multi-year FAA reauthorization bill.123 The length of the effort was a
reflection of the difficult issues faced. Major issues that had to be resolved included
the budgetary treatment of the aviation trust fund, raising the ceiling on the passenger
facility charge (PFC), as well as the amounts to be spent and their distribution.
Rather than debating further modifications of the “cap and penalty” provisions
the initial debate focused on provisions to take the aviation trust fund off-budget or
erect budgetary “firewalls” to assure that all trust fund revenues and interest would
be spent each year for aviation purposes. These proposals, however, never emerged
from the conference committee. Instead, the enacted legislation included a so-called
122
The 1994 Act was preceded by two acts that extended the AIP program. The Airport and
Airway Safety, Capacity, Noise Improvement and Intermodal Transportation Act of 1992
(P.L. 102-581) extended AIP through FY1993 and the AIP Temporary Extension Act of
1994 (P.L. 103-260) extended AIP through June 30, 1994.
123
During the debate AIP underwent four separate authorization extensions: P.L. 105-227
extended AIP through March 31, 1999; P.L. 106-6 through May 31, 1999; P.L. 106-31
through August 6, 1999; and, finally, P.L. 106-59 through September 30, 1999. The AIP
was held in abeyance from October 1, 1999 until AIR21 was enacted on April 5, 2000. See
CRS Report RS21621, Surface Transportation and Aviation Extension Legislation: A
Historical Perspective, by John W. Fischer and Robert S. Kirk.
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“guarantee” that all of each year’s receipts and interest credited to the trust fund
would be made available annually for aviation purposes. The guarantee is enforced
by changes made in House and Senate point-of-order rules. One rule makes it out-oforder to consider legislation that does not spend all trust fund revenues for aviation
purposes. The second rule makes it out-of-order to consider legislation for funding
FAA’s Operations and Maintenance (O&M) or Research, Engineering and
Development (R,E&D) budgets if AIP and the F&E budgets are funded below
authorized levels. Although these provisions are not considered airtight, the
budgetary resources made available for AIP during the years (FY2001-FY2003) that
the AIR21guaranties were in effect were at or near the program’s authorized levels.
AIR21 did not, however, make any major changes in the structure or functioning
of AIP. The big difference was the amount of money made available for airport
development projects. From a funding level of approximately $1.9 billion for
FY2000, AIP’s authorization increased funding by nearly 70% to $3.2 billion for
FY2001, then to $3.3 billion for FY2002, and to $3.4 billion for FY2003. Within the
context of these increases, the formula funding and minimums for primary airports
were doubled starting in FY2001. The state apportionment for general aviation
airports was increased from 18.5% to 20%. The noise set-aside was increased from
31% to 34% of discretionary funding and a reliever airport discretionary set-aside of
0.66% was established.
AIR21 also increased the PFC maximum to $4.50 per boarding passenger. In
return for imposing a PFC above the $3 level, large and medium-hub airports would
give back, or “forgo,” 75% of their AIP formula funds. This made more AIP funding
available to the smaller airports.
Vision 100: Century of Aviation Reauthorization Act
of 2003 (P.L. 108-176; H.Rept. 108-334)
Vision 100, the FAA reauthorization act, signed by President George W.Bush
on December 12, 2003, included some significant changes to AIP but nothing of the
scale or consequence of the changes made under AIR21. Both the funding increase
and the programmatic changes were modest by comparison. Vision 100 funded AIP
for four years at the following annual levels: $3.4 billion for FY2004, $3.5 billion for
FY2005, $3.6 billion for FY2006, and $3.7 billion for FY2007. The law codified the
AIR21 spending “guarantees” through FY2007. The agreement does not authorize
the use of AIP funds for the administration of the program.
Vision 100 increased the discretionary set aside for noise compatibility projects
from 34% to 35%. It increased the amount that an airport participating in the
Military Airport Program (MAP) could receive to $10 million for FY2004 and
FY2005, but in FY2006 and FY2007 it returned the maximum funding level to $7
million. The act allowed non-primary airports to use their entitlements for revenue
generating areas if the Secretary of DOT determines that the sponsor has made
adequate provisions for the air-side needs of the airport. The agreement permitted
AIP grants at small airports to be used to pay interest on bonds used to finance an
airport project. The act included a pilot program to test procedures for authorizing
small airports to impose PFCs. Vision 100 repealed the authority to use AIP or PFC
funds for most airport security purposes.
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Appendix B. Airport Definitions124
Commercial Service Airports
Publicly owned airports that receive scheduled passenger service and board
(enplane) at least 2,500 passengers each year (517 airports).
Primary Airports. All 382 primary airports board more than 10,000
passengers each year. Primary airports are subdivided into four categories of airport:
Large Hub Airports. Board 1% or more of total system-wide enplanements
(30 airports that together account for 68.7% of all enplanements)
Medium Hub Airports. Board 0.25% but less than 1% (37 airports that
together account for 20% of all enplanements)
Small Hub Airports. Board 0.05% but less than 0.25%.(72 airports that
together account for 8.1% of all enplanements)
Non-hub Primary Airports. Board more than 10,000 but less than 0.05%
(243 airports that together account for 3% of all enplanements)
Non-Primary Commercial Service Airports. Board at least 2,500 but no
more than 10,000 passengers each year (135 airports that together account for 0.1%
of all enplanements)
Other Airports
Cargo Service Airports. Airports that are served by aircraft that provide air
transport for cargo only and have a total “landed weight” of over 100 million pounds.
Reliever Airports. Airports designated by the FAA to relieve congestion at
commercial airports and provide improved general aviation access to a community
(i.e. to draw general aviation activity away from congested commercial metropolitan
airports). There are 274 airports classified as reliever airports.
General Aviation Airports. All other airports. General aviation airports do
not serve military or scheduled commercial service but typically do support one or
more of the following: business/corporate, personal, and instructional flying;
agricultural spraying; air ambulances; on-demand air-taxies; and/or charter aircraft
service. There are 2,573 general aviation airports in the national airport plan
(NPIAS). In addition there are 16,476 non-NPIAS low-activity airports that together
accounted for 0.1% of all enplanements. Non-NPIAS airports are not eligible for
AIP funding.
124
2007-2011 NPIAS, 4-9. Passenger enplanements are the total number of passengers
boarding aircraft, including originating passengers as well as those changing aircraft.
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.