# Presentation: 672991

## Other Financial Considerations

- It’s all about the money!

## Ok, It’s Not – But Some Think It Is..

- _Financial Program Encompasses_
- Fiscal Component
- Eligibility Component
- Political Component*

****Politics is a reality, but fortunately, it is by far the smallest component***

## AIRPORT FUNDING MECHANISMS

- Revenue Bonds
- Concessions (parking lots, auto rental, stores)
- Landing Fees
- Fuel Flowage Fees
- Local Funds (e.g state grant/general fund)
- Federal Grant
- Passenger Facility Charges

- _Commonly Used:_

- General Obligation Bonds
- Special Facility Bonds (non-airport beneficiaries)
- Bank Loan
- 3rd Party Development

- _Not Commonly Used:_

## Fiscal Components

**Passenger Facility Charge (PFC)**
**Departure Head Tax**
**Airport Improvement Program (AIP)**
**Aviation Trust Fund**
**Domestic ticket tax (52% in FY 2001)**
**Domestic segment fee (17%)**
**Domestic rural passenger tax (1%)**
**International departure tax (7.5%) – incl. AK/HI**
**International arrival tax (7.5%) – incl. AK/HI **
**Frequent flyer tax (2%)**
**Domestic cargo/mail tax (5%)**
**General aviation fuel tax (1%)**
**Commercial fuel tax (7%)**
***Security fee (New fee established after 9/11/01)***

## How It Works “Simplified”

***PFC***

## One More Thing Before Grant: OST

- Office of the Secretary of Transportation, Office of Congressional Affairs
- Notify Congress of intent to grant funds
- FAA may not notify Sponsor of project approval prior to OST clearance
- OST approval process begins with FAA submittal of “package” to OST, and ends with official OST release

## Benefit to Cost Analysis (BCA)

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## BCA continued..

_**BCA Does Not Mean**_:
**B**urdensome
**C**ostly, and
**A**rduous

## BCA Policy Defined

- A BCA is required for any project which....

- preserves or enhances _***capacity***_, _**AND**_ the _***total discretionary***_*** ***funds requested exceed $5 million, over the life of the project
- seeks approval as a LOI

## BCA – Capacity Confusion

- FAA uses the  term “capacity”, in several senses.....
- .... Hence the confusion and frustration!

**What do they mean..?**
**Throughput**
**Delay**
**Funding**

**What, what, what!!**

## BCA – Capacity Confusion

- The term “capacity”, in this case, _should not_ be confused with the use of the term in these cases.....

-   _Discretionary funding (CSSN)_

-   _Level of Delay_

- Refers to discretionary funding primarily for
- large and medium hub airports

- The old “CA” discretionary code in the NPIAS/
- ACIP has been replaced with a generic “DI”

- Refers to airports which have 20,000 hours or more
- of delay

## BCA – what does it mean?

**Preserve**:                                          to extend the useful life of 				      existing infrastructure  					      (e.g.) to rehab an apron

**Enhance**:                                         to improve upon an existing
- 				     infrastructure, or to create 				     new infrastructure (e.g.) to 				     strengthen an existing apron, 				     or extend or build a runway

**Capacity**:                                         anything which allows more,				      or bigger aircraft to use the 				      airport.

## BCA needed when...

- Projects which (typically) do not require a BCA....

- Improving a runway safety area
- Correcting line of sight issues
- Environmental mitigation
- Installing/rehabilitating lights, signs

- Projects which _might_ require a BCA....

- Land acquisition (depends on purpose)
- Noise barrier (if not done as Part 150)

## BCA not needed when...

-  Rehabilitating pavements which already
- had a BCA to support original development
- (when conditions remain static or improve)
-  Rehabilitating pavements when no reasonable
- alternative exists (e.g. single runway at a
- commercial service airport)

- A cost effectiveness study, or documentation
- of a review of options to accomplish the
- preferred alternative, _may_ be required

_**HOWEVER**_

## BCA – Why Do It?

- It makes you _***think***_ about “plausible” alternatives
- It might _***change***_ the scope of the project
- It _***validates***_ the need for the project
- It provides a _***defensible***_ position for an investment decision
- It provides _***support***_ for rejecting an alternative or the project

- -- Because it is required!! --

## BCA – Lessons Learned

- Check the assumptions
- Check data for obvious errors
- e.g. using wrong discount rate
- Verify forecast consistency with TAF
- Delta no greater than 10%
- Verify capacity need
- Check ASV
- Check documentation of use by larger/more aircraft
- Verify project costs
- Is your plan consistent with FAAs?

## BCA – Lessons Learned continued..

- Be aware of minimal efforts to just reach a BCA of 1
- Could haunt you if there are errors in data and/or assumptions
- Timing is critical
- Don’t wait too long - forecasts aren’t valid forever
- May have to explain impacts of critical events
- May want to coincide BCA with master planning efforts

## Eligibility Component:

- Statute
- Policy
- Legal Opinion
- Litigation

- Why do we have these rules?

- How are these rules developed?

- To establish a framework of unity from which we can work
- To provide background and documentation about program decisions

## Eligibility Component:5 Simple Rules

- Airport must be in the NPIAS
- Project must be in the NPIAS-ACIP
- Consult Order 5100.38B (AIP Handbook)
- If it’s not in the Handbook, it does not automatically make it ineligible – but more than likely it is
- Eligibility does not equal fundability
- Number of ARFF vehicle example
- Augmentation issue

## Eligibility Component:Generalities

- Project must relate to movement of passengers and baggage
- Project must be on the airport
- paragraph 303 of AIP Handbook notes 11 exceptions
- Project can not provide preferential benefit
- If it’s not related to creating, upgrading, or rehabilitating pavement or the operations around or on it, you might want to ask whether we can do it
- We do not fund nice to have items

## Political Component:

- It is a reality:  Congressional inquiries; place names (earmarks); response to events
- Professionalism should keep it to a minimum (that includes not only our expertise, but our ability to show good reason for doing, or not doing something)
- Impacts our planning efforts
- Someone will always be unhappy with whatever decision is made

## The Political Squeeze:Security Example

**GAO (03-27) recently reported that funding for several types of projects, including safety had decreased.**

_***Mandatory Funding Requirements***_**:**
**Letters of Intent**
**Military Airport Program**
**Noise Mitigation**
**Apportionments**

**Where does the money come from to fund additional security costs...?  ****Other projects.**

## The Political Dilemma

- Planned Projects
- Safety
- Capacity
- Pavements

- New or Additional
- Security Projects

***With competing concerns, balance is the key***