prompt_front: You are given two reports by the government agency.



Question: Write a one-page summary of the report 1.

Report 1: DOD defines a hosted payload as an instrument or package of equipment—a sensor or communications package, for example— integrated onto a host satellite, which operates on orbit making use of the host satellite’s available resources, including size, weight, power, or communications  A commercially hosted DOD payload is a DOD payload on a commercial satellite  In general, hosted payloads may be either experimental or operational  Experimental payloads demonstrate new or existing technologies on orbit for potential use on future operational space systems  Operational payloads deliver required capabilities to end users  Hosted payload arrangements may be unsuitable for some missions  For example, some payloads may be too large or need too much power for a host satellite to feasibly accommodate, or may require unique satellite maneuvers that, if exercised, would negatively affect a host satellite’s primary mission  Civil government agencies, like NASA and the National Oceanic and Atmospheric Administration (NOAA), have used or have plans to use commercially hosted payloads  For more information on the commercially hosted payloads that civil agencies have used or plan to use, see appendix I  We and others have identified potential benefits of using commercially hosted payloads to gain space-based capability, such as: Cost savings—Commercially hosted payloads may increase affordability because the government payload owner pays for only a portion of the satellite development and shared launch and ground systems costs, rather than for the entire system  Also, smaller, lighter, and less complex systems may shorten procurement timelines, reduce research and development investment, and reduce risk in technology development  Some government agencies have reported saving hundreds of millions of dollars to date from using innovative arrangements such as hosted payloads  Faster on-orbit capability—Because commercial satellites tend to take less time from concept development to launch than DOD systems do and have relatively frequent launches, hosting government payloads on commercial satellites may achieve on-orbit capability more quickly  Increased deterrence and resilience—Distributing capabilities across more satellites increases the number and diversity of potential targets for an adversary and may make it more difficult for an adversary to decide which assets to attack, serving as a deterrent  Additionally, more frequent launches could increase DOD’s ability to reconstitute its satellite groups—or constellations—more quickly in case of unexpected losses of on-orbit capabilities  Recent strategic and policy guidance government-wide and at DOD have stressed the need for U S  space systems to be survivable, or resilient, against intentional and unintentional threats—both types of which have increased over the past 20 years  Intentional threats can include purposeful signal jamming, laser dazzling and blinding of satellite sensors, missiles intended to destroy satellites, and ground system attacks  Some unintentional threats to satellites are created by the harsh space environment itself, like extreme temperature fluctuations and radiation, and the growing number of satellites, used rocket parts, and other space debris on orbit, which could collide with orbiting satellites  Continual technology upgrades and industrial base stability— New technologies may be continually incorporated into space systems using hosted payloads, which may be uniquely suited for higher rates of production and launches than traditional DOD satellites  Using commercial satellites for government payloads could help maintain the U S  commercial space industry’s ongoing technology developments by maintaining stable business and incentivizing new companies to enter the marketplace  Further, increased production may be distributed over multiple contractors—including traditionally lower-tier contractors—to foster more competition  As we reported in October 2014, hosted payloads are among several avenues DOD is considering to increase the resilience of its satellites in the face of growing threats  DOD has been looking at ways to break up larger satellites into multiple smaller satellites or payloads after decades of building large, complex satellites to meet its space-based requirements  The broader concept of breaking up larger satellites into smaller ones is known as disaggregation  In 2014, we reported that DOD lacked critical knowledge about the concept of disaggregation, including how to quantify a broad range of potential effects  At the time, for example, DOD did not have common measures for resilience, which we found is a key consideration in making a choice as to whether to continue with a current system architecture or to change it  Recently, senior DOD officials have also made public statements that indicate a willingness to consider innovative acquisition approaches so that acquisition timelines can be reduced  For example, in a 2016 strategic intent document, the Commander of Air Force Space Command stated that the Air Force should seek innovative acquisition approaches that leverage DOD’s buying power across the industry  Additionally, the Secretary of the Air Force stated that the Air Force is exploring more affordable and innovative ways to acquire its satellite communication services through investments in commercial industry and international partnerships  Opportunities to match a DOD payload with a commercial host can arise in various ways  DOD may first develop a payload and seek to match it with a commercial host, DOD may work in tandem with a commercial company to develop a payload to be hosted, or commercial companies— likely the satellite owner, operator, or system integrator—can first identify upcoming satellite hosting opportunities to DOD  In each scenario, the DOD program (or payload owner) and the commercial host generally consider the basic properties of both the payload and host satellite in attempting to find a match  These properties—including the size, weight, area, power, and required orbital characteristics of the payload and host satellite—should be complementary to create an arrangement that is mutually compatible for each party, according to Aerospace Corporation recommendations and officials we spoke with  Specifically, these properties include: The size of the payload when it is stowed and when it is deployed on orbit, including the available area on the host satellite; The available weight and mass distribution the host satellite can The available power on the host satellite; The thermal requirements of the payload and corresponding capability of the host satellite; The requirements to limit electromagnetic interference—disturbances that affect electrical circuits on the payload and host satellite; The available command, telemetry, and mission data rate requirements of the payload and corresponding capability of the host satellite; The compatibility of interfaces between the payload and host satellite; The pointing accuracy and stability of the host satellite; and The necessary orbits, including altitude and inclination  Other considerations when matching a DOD payload with a host satellite are the compatibility of radio frequency spectrum (spectrum) needs between the payload and host, and the satellite’s intended orbital location  Spectrum is a natural resource used to provide essential government functions and missions ranging from national defense, weather services, and aviation communication, to commercial services such as television broadcasting and mobile voice and data communications  The frequencies, or frequency bands, of spectrum have different characteristics that make them more or less suitable for specific purposes, such as the ability to carry data long distances or penetrate physical obstacles  Each frequency band has a limited capacity to carry information  This means that multiple users operating at approximately the same frequency, location, and time have the potential to interfere with one another  Harmful interference occurs when two communication signals are either at the same frequencies or close to the same frequencies in the same vicinity, a situation that can lead to degradation of a device’s operation or service  As such, a payload or satellite’s specific placement in any given orbit could potentially interfere with a neighboring payload or satellite in the same orbit  In the United States, the National Telecommunications and Information Administration (NTIA) of the Department of Commerce is responsible for establishing policy on regulating federal government spectrum use and assigning spectrum bands to government agencies  The Federal Communications Commission (FCC) allocates spectrum and assigns licenses for various consumer and commercial purposes  Additionally, all government and commercial satellite programs must apply for approval to operate at a given orbital location using a given band of spectrum internationally through the International Telecommunication Union (ITU)  The ITU is an agency of the United Nations and coordinates spectrum standards and regulations  In 2011, the Air Force created the Space and Missile Systems Center’s (SMC) Hosted Payload Office (HPO) to provide acquisition architectures that achieve on-orbit capability more quickly and affordably  The HPO uses various resources and capabilities to meet its objectives: Hosted Payload Solutions Contract: In 2014, SMC established the Hosted Payload Solutions (HOPS) multiple award indefinite delivery indefinite quantity (IDIQ) vehicle  According to HPO documents, SMC established the contract—available to all DOD and civil agencies—to streamline commercially hosted payload arrangements by selecting a pool of commercial vendors that government payload owners can use to access space on commercial host satellites  Programs do not have to use HOPS, however, and may contract with commercial companies directly  The HOPS vehicle includes 14 vendors across the commercial satellite industry  SMC awarded task orders for studies to each of the vendors with a contract to gather information on potential host opportunities, orbits and launch schedules, cost estimates for hosting fees, and existing host satellite interfaces  Feasibility Studies: Using the information it gathered from the 14 vendor studies, the HPO stated that it built a database to provide information on potential satellite hosts and the suitability of certain payloads for host opportunities, including cost estimates  The HPO stated that it can use this information to assess the feasibility of a hosted payload opportunity for interested SMC space programs  The HPO also conducts feasibility studies for interested programs based on publicly available information and from industry requests for information  Hosted Payload Interface Design guidelines: The HPO published hosted payload interface design guidelines to provide technical recommendations for hosted payload developers  According to HPO officials, the intent of these guidelines is to reduce integration costs and improve the host-ability of all hosted payloads  Hosted Payload Data Interface Unit: The HPO is developing a secure hosted payload data interface unit to protect payload data from unauthorized access by the host  Following its release of draft documentation to industry stakeholders in March 2018, the HPO is currently integrating National Security Agency requirements into its request for data interface unit prototype proposals  According to HPO officials, the office plans to issue a request for prototype proposals in May 2018, integrate a data interface unit and payload in 2020, and launch the integrated system in 2022  Hosted Payload Expertise: The HPO provides general advice and expertise to programs in the form of hosted payload architectural studies, input on acquisition planning and strategy documents, and other research efforts, according to the office  Since 2009, DOD has launched three experimental payloads on commercial host satellites and plans to conduct three more missions through 2022, as shown in figure 1  DOD estimates that it has achieved cost savings of several hundred million dollars from these experimental payloads  According to DOD officials, DOD expects to realize additional cost savings and be able to place capabilities on orbit more quickly from several hosted payload efforts that are planned or underway  Opportunities for additional hosted payload efforts may arise in the near term amid DOD planning for upcoming and follow-on space systems  Since 2009, DOD has placed experimental payloads—intended to test or demonstrate an on-orbit capability—for three programs on commercial host satellites  Several officials within DOD told us that experimental payloads tend to be smaller, less expensive, and their missions more risk- tolerant than traditional operational DOD payloads  In these ways, they said experimental payloads are better-suited to hosting arrangements than operational DOD payloads  The Air Force has not yet used the HOPS multiple award IDIQ vehicle—which was awarded to facilitate commercially hosted payload arrangements—to match a government payload with a commercial host  The HPO told us that, in 2019, NASA and NOAA will be the first agencies to use the HOPS vehicle to find a host satellite for two of their payloads  Table 1 describes the three experimental payloads hosted on commercial satellites to date  For more information on civilian agencies that use or plan to use commercially hosted payloads, see appendix I  Air Force officials told us that using commercial host satellites for their experimental payloads has saved several hundred million dollars across these programs and shortened timelines for launching payloads into space  For example, the HPO estimated that the Air Force saved nearly $300 million by using a commercial host satellite for its Commercially Hosted Infrared Payload (CHIRP), as compared to acquiring the same capability using a dedicated, free-flying satellite  In addition, Air Force officials estimated that using commercial host satellites for its Responsive Environmental Assessment Commercially Hosted (REACH) effort saved the Air Force approximately $230 million  The REACH effort consists of over 30 payloads hosted on multiple satellites  Further, because of the commercial host’s launch schedule, the Air Force achieved its on-orbit capability sooner than if it had acquired free-flying satellites  In April 2013, we found that the Internet Protocol Routing in Space (IRIS) payload, launched in 2009, was a commercially hosted payload pilot mission that would provide internet routing onboard the satellite, eliminating the need for costs associated with certain ground infrastructure  DOD and Air Force officials told us they are planning to pursue commercially hosted payloads for three programs in the coming decade to achieve cost savings and on-orbit capability more quickly  In each case, officials said they have identified cost and schedule benefits for their respective programs  For example, the Missile Defense Agency (MDA) stated that it expects to save approximately $700 million compared to the cost of traditional, free-flying satellites by acquiring its Spacebased Kill Assessment capability as payloads on commercial host satellites, and expects to achieve on-orbit capability years earlier than if it had acquired dedicated satellites for these payloads  Additionally, a program official from the Defense Advanced Research Projects Agency (DARPA) told us DARPA plans to use a commercially hosted payload for the Phoenix Payload Orbital Delivery effort to test more affordable ways to access space  Moreover, Air Force officials told us they expect to save $900 million over free-flying satellites by using two Space Norway satellites to fly an Enhanced Polar System Recapitalization payload  Space Norway plans to launch its satellites in 2022, which the Air Force expects will allow it to meet its need for DOD’s required capability  See table 2 for additional details on DOD’s planned hosted payloads  Additional opportunities for commercially hosted payloads may be forthcoming as DOD develops requirements and designs for new and follow-on space programs  DOD has been analyzing various alternatives to explore possible future space system designs and acquisition strategies for several of its upcoming follow-on programs  In these cases, the analysis of alternatives (AOA) study guidance, set forth by DOD’s Office of Cost Assessment and Program Evaluation, included direction for the studies to consider new approaches for acquiring space capabilities  For example, AOA guidance directed study teams to include hosted payloads or other disaggregated designs, and commercial innovations in technology and acquisition to meet some space mission requirements  Table 3 provides further details of recently completed and ongoing AOAs to study new designs—or architectures—for upcoming follow-on satellite systems  Two factors have contributed to DOD’s limited use of commercially hosted payloads  First, DOD officials identified logistical challenges to matching government payloads with any given commercial host satellite  For example, most of the offices we spoke with cited size, weight, and power constraints, among others, as barriers to using hosted payloads  Second, while individual DOD offices have realized cost and schedule benefits, DOD as a whole has limited information on costs and benefits of hosted payloads  Further, the knowledge it has gathered is fragmented across the agency—with multiple offices collecting piecemeal information on the use of hosted payloads  The limited knowledge and data on hosted payloads that is fragmented across the agency has contributed to resistance among space acquisition officials to adopting this approach  DOD acquisition officials within the Office of the Secretary of Defense told us matching requirements between government payloads and commercial satellites is typically too difficult for programs to overcome  Specifically, they said the cumulative complexity of matching size, weight, power, and spectrum needs; aligning government and commercial timelines; and, addressing concerns over payload control and cybersecurity amounts to too great a challenge  DOD’s Hosted Payload Office is developing tools designed to help address these challenges and DOD offices that have used hosted payloads have also found ways to overcome them  Officials from DOD acquisition and policy offices, as well as Air Force and industry officials we spoke with, cited matching size, weight, and power between DOD payloads and commercial host satellites as a challenge  We similarly found in April 2013 that ensuring compatibility between payloads and host satellites can pose challenges because not all commercial satellites are big enough or have enough power to support hosting a payload  Whether a host satellite can accommodate a payload can depend on the size of the payload  Additionally, according to industry representatives, the space taken up by the hosted payload affects the amount of revenue-generating payloads the host may place on its satellite, such as additional transponders—devices that emit and receive signals—for the communications services it provides to customers  The complexity of integrating a government payload onto a commercial host can also drive the overall cost of the arrangement  However, officials said these challenges can be mitigated through the use of various expertise and lessons learned  HPO officials and industry representatives have proposed several approaches to help match properties like size, weight, and power between a DOD payload and a commercial host satellite  The HPO is developing a hosted payload interface unit that could potentially provide a standard for payload developers and system integrators to develop and test their systems  One commercial company proposed an interface unit that would accommodate a “universal” DOD payload  Additionally, industry experts stated that with sufficient planning and time for system integration, nearly any payload can be accommodated on a host satellite  The HPO issued guidelines in 2017 to assist DOD payload developers in working toward typical payload requirements and standards for host satellites in low Earth orbit and geostationary Earth orbit  These guidelines inform the payload’s electrical power and mechanical designs  The principal guideline—echoed by the successful CHIRP demonstration in 2011—is that the hosted payload must “do no harm” to the mission performance of its host  Also, satellite interfaces can vary from company to company  Some commercial companies had experience with the task—and business opportunity—of integrating multiple customers’ payloads onto satellites since at least the 1990s  Air Force, HPO, and industry officials told us that, ideally, the payload should use the same spectrum allocation as the commercial host  They said that this is due in part to the lengthy satellite registration process that takes place in the United States and through the ITU that must be undertaken prior to placing a satellite on orbit  Some DOD officials added that the process for all new satellites from initial filing to ITU approval takes around 7 years  If a satellite owner registers for one frequency band of spectrum and later requires a different band, the owner has to begin the registration process from the beginning—restarting the 7-year timeline  This can be problematic for DOD payload owners seeking to match their military communications payload with an already-registered host satellite—particularly if the host satellite’s spectrum allocation is incompatible with the DOD payload  HPO and other DOD officials said that very different spectrum needs between payload and host would therefore preclude the match  Moreover, a need for military—as opposed to commercial—spectrum for communications payloads can introduce additional complications  Although a process exists for a commercial satellite owner to license military spectrum for use by a hosted payload, representatives from DOD’s Chief Information Officer’s (CIO) office could cite only one instance where this has happened  One possible explanation stems from a 2012 memorandum from DOD’s CIO that outlines various preferred processes for a commercial host satellite to host military communications payloads  Several industry officials we spoke to said that the various processes outlined in the 2012 memorandum would add to the already-lengthy process of spectrum registration  Further, the memorandum instructs that contractual terms between the payload and host satellite owners should restrict all military spectrum use exclusively to the U S  military  However, one industry official told us that international entities do not necessarily recognize U S  military spectrum, and commercial companies that obtain licenses through other countries are permitted to use those frequencies  For example, a senior official of one commercial company we met with stated that the company licensed U S  military spectrum through another North Atlantic Treaty Organization government after failing to successfully coordinate an FCC request with DOD and NTIA  DOD and industry representatives told us that from a business perspective, it makes little sense for a commercial company to seek hosting opportunities for DOD payloads that require U S  military spectrum  Government and industry officials we spoke with said that aligning the development and acquisition timelines of a government payload and commercial host satellite is a challenge  The timeline associated with developing government sensors is generally much longer than that of commercial satellites, potentially creating difficulties in scheduling and funding commercially hosted payload arrangements  For example, DOD satellite systems take, on average, over 7 years to develop and launch a first vehicle, while commercial satellite programs typically take between 2 and 3 years  DOD payload owners may find it challenging to accelerate development and acquisition schedules to match those of the commercial satellite host  Additionally, DOD officials we spoke with said that their budget and planning processes require funding commitments up to 2 years in advance of actually receiving those funds  This can further complicate alignment with commercial timelines because the development of a government sensor would need to be underway well in advance of a decision to fund a commercially hosted payload approach  Furthermore, federal law generally prohibits agencies from paying in advance for a future service or from obligating future appropriations  However, several DOD and other government agency officials we spoke with said that it is possible to align government and commercial timelines  For example, MDA adopted the commercial host’s schedule to ensure its Spacebased Kill Assessment payload was ready for integration and launch without delaying the host satellite or worse—missing its own ride to space  DARPA officials told us they were also able to align DARPA acquisition and development schedules with the commercial host  The Air Force’s Enhanced Polar System (EPS) Recapitalization program officials were able to leverage existing documents such as requirements documents and acquisition strategies from the predecessor program to speed up the acquisition process  According to Air Force officials, the EPS Recapitalization program had a unique opportunity to take advantage of the availability of a commercial host and had the support of a high ranking Air Force official that enabled the program to move forward using a commercially hosted payload approach  Some officials cited concerns with combining government and commercial space missions  For example, officials across DOD told us they were wary of losing control over a hosted payload should a commercial company’s needs change  They said that theoretically, a commercial provider could decide to turn off power to the government’s payload if the host satellite needed extra power to perform a certain function  Additionally, DOD space program officials expressed concern that commercial practices for ensuring the mission success of the payload may not be up to government standards—that commercial testing and integration standards may be less robust than those used by traditional government programs to ensure success, adding risk to the government payload  Furthermore, officials in one DOD program office expressed a distrust of commercial host motives in offering to support a government payload on their satellite, suggesting that a company could be intending to steal government technologies  However, industry officials we spoke with said that DOD can generally issue a solicitation that includes necessary stipulations  For example, including a condition to preserve the payload’s priority of mission and other terms to protect the government’s investment may provide some assurance to those officials that perceive security risks  Additionally, some officials we spoke to cited cybersecurity concerns  They cited loss of control over data security as a challenge to using hosted payloads  Officials told us the data could be vulnerable to eavesdropping or manipulation as it travels between government ground systems and the commercially hosted government payload  However, according to HPO officials, the Air Force overcame this challenge on the CHIRP mission by procuring a secure interface that provided a data link between the payload and dedicated transponder and ground terminal  As mentioned previously, the Hosted Payload Office is developing a hosted payload data interface unit to mitigate this challenge by securing payload data communications from the host satellite  DOD, at the department-wide level, has limited information on commercially hosted payloads—mostly due to a lack of experience in using hosted payloads and complexities associated with them  For example, acquisition officials in the Office of the Secretary of Defense told us that DOD needs more data and analysis of the potential costs and benefits  However, realistic cost modeling for commercially hosted DOD payloads is unavailable because costs can vary across potential hosts and DOD has minimal experience using commercial hosts  Similarly, the HPO performs market research and cost estimates based on data from commercial companies, but according to one official in the HPO, the costs tend to vary based on the supply and demand in the commercial satellite industry  Additionally, HPO officials said their cost savings analyses are based on only two real-world commercially hosted DOD payloads— CHIRP and REACH  HPO officials told us that with additional government data they could compare the costs of system architectures that include free-flier satellites with those that use commercially hosted payloads  Additionally, some potential benefits of using commercially hosted payloads, such as resilience, may be difficult to measure  In our 2014 report on disaggregation, we recommended that DOD define key measures related to disaggregation, including developing metrics to measure resilience  DOD is in the process of developing standard metrics for resilience  DOD’s knowledge of commercially hosted payloads is also fragmented across the agency  Several DOD offices are independently conducting activities related to commercially hosted payloads, such as pursuing commercially hosted payload arrangements, developing lessons learned, and determining demand for commercial hosts  For example, MDA officials told us they have developed cost and technical data and lessons learned based on MDA’s Spacebased Kill Assessment payload— launched earlier this year—but have not shared it across the agency  On the other hand, the Space Test Program, also housed within the Air Force’s SMC develops lessons learned on its payloads, which are government payloads on government host satellites and officials there told us they provide lessons learned to the HPO  In October 2017, SMC’s Launch Office sent a request for data on hosted payloads to DOD agencies, research laboratories, and universities, but the HPO was not an active participant in this request  Independent efforts within DOD to collect and analyze cost, schedule, and performance results from hosted payloads can create fragmentation in DOD’s knowledge base and can increase the risk of duplicative efforts within DOD  DOD does not collect or consolidate agency-wide knowledge on commercially hosted payloads and has no plans to do so  Agency officials stated that DOD does not require programs outside of SMC to consult the HPO when seeking commercially hosted payload arrangements  The Air Force established the HPO to facilitate commercially hosted payloads, however, the 2011 Program Management Directive that established the HPO states that the HPO will coordinate with SMC directorates for detailed implementation of hosted payloads but does not address coordination with agencies or directorates outside of SMC  According to an HPO official, programs are not required to use HPO expertise or tools as they pursue using hosted payloads  Further, this official stated that programs are not required to provide any data or lessons learned to the HPO, or any other central point within DOD, following the pursuit or completion of a hosted payload arrangement  The 2011 Program Management Directive directs the HPO to provide lessons learned to SMC directorates but does not direct SMC offices to share information— such as costs, technical data and lessons learned on completed commercially hosted payload efforts—with the HPO  An HPO official indicated that the HPO obtains data through informal communication with those programs using hosted payloads that are willing to share data  We found that limitations and fragmentation of data and knowledge are contributing to resistance within DOD to using hosted payloads  Several DOD acquisition and program officials we spoke with who did not have experience with hosted payloads generally stated that the potential risks to using hosted payloads outweighed the benefits, and that there was little evidence-based analysis to prove otherwise  They were not aware of existing tools that could assist them in making decisions even though the HPO has been developing these tools and has made efforts to share them within SMC  DOD acquisition and program officials consistently cited a preference for maintaining the acquisition status quo over introducing any perceived added risk to their programs  At the same time, however, officials who have used hosted payloads were able to overcome logistical and technical challenges and realize cost savings  However, according to an HPO official, there is currently no requirement in place to facilitate sharing their approaches to doing so  We have reported in the past that DOD’s culture has generally been resistant to changes in space acquisition approaches and that fragmented responsibilities for acquisitions have made it very difficult to coordinate and deliver interdependent systems  Moreover, our past studies of commercial strategic sourcing best practices have found that that leading companies centralize procurement decisions by aligning, prioritizing, and integrating procurement functions within the organization  Establishing the Hosted Payload Office is one step in this direction, but the office is organized under the Advanced Systems and Development Directorate—a research and development organization—under SMC  Moreover, the 2011 directive that established the HPO does not address coordination or responsibilities for agencies or directorates beyond SMC  Consolidating knowledge is important because it allows organizations to share information and data upon which to develop consistent procurement tactics, such as ways to overcome challenges in matching a government payload with a commercial host  As we found in our work on commercial strategic sourcing best practices, organizations that struggled with fragmented information in the past overcame this challenge in part by consolidating their data on costs and spending  While hosted payload acquisitions are not a typical service acquisition, successful organizations have found that these techniques work for highly specialized technical services for which few suppliers exist  As DOD considers new architectures and acquisition approaches, commercially hosted payloads have the potential to play a role in delivering needed capabilities on orbit more quickly and at a more affordable cost than traditional DOD space acquisitions  Placing DOD payloads on commercial satellites might also be an effective method by which to increase resiliency  However, DOD’s experience and the data collected so far are limited in informing decisions on the use of these payloads  DOD would benefit from leveraging the knowledge and information gained from each hosted payload experience  Centralized collection and assessment of agency-wide data would help enable DOD to mitigate the logistical challenges inherent in matching payloads to hosts, and better position DOD to make reasoned, evidence-based decisions on whether a hosted payload would be a viable solution to meet warfighter needs  Without such knowledge, and a way for interested programs to leverage it, DOD may not be fully informed about using hosted payloads and may risk missing opportunities to rapidly and affordably address emerging threats in space  The Secretary of Defense should require programs using hosted payloads to provide cost and technical data, and lessons learned to a central office  In implementing this recommendation, DOD should consider whether the Hosted Payload Office is the most appropriate office to centralize agency-wide knowledge  (Recommendation 1) We provided a draft of this report to the Department of Commerce, NASA, and DOD for comment  The Department of Commerce provided technical comments, which we incorporated as appropriate  NASA did not have comments on our draft report  In its written comments, DOD concurred with our recommendation and stated that SMC had initiated a major reorganization since we drafted our report and that under the new organizational construct, the Hosted Payload Office had changed and may not be the appropriate office for centralizing DOD-wide hosted payload knowledge  DOD’s comments are reproduced in appendix II  DOD also provided technical comments which we incorporated as appropriate  We are sending copies of this report to the appropriate congressional committees, the Secretary of Commerce, the Secretary of Defense, the Administrator of NASA, and other interested parties  In addition, the report is available at no charge on the GAO website at http://www gao gov  If you or your staff have any questions about this report, please contact me at (202) 512-4841 or by email at chaplainc@gao gov  Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report  GAO staff who made key contributions to this report are listed in appendix III  As shown in table 4, civil and other government agencies use commercially hosted payloads to enhance navigation systems, monitor environmental pollution, conduct scientific missions, and improve search and rescue systems  Officials from all of the agencies we spoke with cited cost savings and the ability to leverage existing commercial schedules and technologies among the reasons they use commercial host satellites  Cristina T  Chaplain (202) 512-4841 or chaplainc@gao gov  In addition to the contact named above, Rich Horiuchi (Assistant Director), Erin Cohen (Analyst in Charge), Claire Buck, Jon Felbinger, Stephanie Gustafson, Matthew Metz, Sylvia Schatz, and Roxanna Sun made key contributions to this report 


Report 2: The federal government supports the development of airport infrastructure in three different ways  First, the Airport Improvement Program (AIP) provides federal grants to airports for planning and development, mainly of capital projects related to aircraft operations such as runways and taxiways  Second, Congress has authorized airports to assess a local passenger facility charge (PFC) on each boarding passenger, subject to specific federal approval  PFC revenues can be used for a broader range of projects than AIP funds, including "landside" projects such as passenger terminals and ground access improvements  Third, federal law grants investors preferential income tax treatment on interest income from bonds issued by state and local governments for airport improvements (subject to compliance with federal rules)  Airports may also draw on state and local funds and on operating revenues, such as lease payments and landing fees  A federal role in airport infrastructure first developed during World War II  Prior to the war, airports were a local or private responsibility, with federal support limited to the tax exclusion of municipal bond interest  National defense needs led to the first major federal support for airport construction  After the war, the Federal Airport Act of 1946 (P L  79-377) continued federal a id, although at lower levels than during the war years  Initially, much of this spending supported 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  In 1970, Congress responded to increasing congestion, both in the air and on the ground at U S  airports, by passing two laws  The first, the Airport and Airway Development Act, established the forerunner programs of AIP: the Airport Development Aid Program and the Planning Grant Program  The second, the Airport and Airway Revenue Act of 1970, dealt with the revenue side of airport development, establishing the Airport and Airway Trust Fund (AATF, also referred to as the Aviation Trust Fund, and in this report, the trust fund)  The Airport and Airway Improvement Act of 1982 ( P L  97-248 ; the 1982 Act) created the current AIP and reactivated the trust fund  For a more detailed legislative history of AIP, see Appendix A of this report  Eight years later, amid concerns that the existing sources of funds for airport development would be insufficient to meet national airport needs, the Aviation Safety and Capacity Expansion Act of 1990 (Title IX of the Omnibus Budget Reconciliation 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 charge on each paying passenger boarding an aircraft at their airports  Different airports use different combinations of AIP funding, PFCs, tax-exempt bonds, state and local grants, and airport revenues to finance particular projects  Small airports are more likely to be dependent on AIP grants than large or medium-sized airports  Larger airports are much more likely to issue tax-exempt bonds or finance capital projects with the proceeds of PFCs  Each of these funding sources places various legislative, regulatory, or contractual constraints on airports that use it  The availability and conditions of one source of funding may also influence the availability and terms of other funding sources  In a 2015 study, the U S  Government Accountability Office (GAO) found that airport-generated net income financed about 38% of airports' capital spending, AIP 33%, PFCs 18%, capital contributions by airport sponsor (often a state or municipality) or by other sources such as an airline or tenant 6%, and state grants nearly 5%  AIP provides federal grants to airports for airport development and planning  Participants range from very large publicly owned commercial airports to small general aviation airports that may be privately owned but are available for public use  AIP funding is usually limited to construction of improvements related to aircraft operations, such as runways and taxiways  Commercial revenue-producing facilities are generally not eligible for AIP funding, nor are operating costs  The structure of AIP funds distribution reflects congressional priorities and the objectives of assuring airport safety and security, increasing airport capacity, reducing congestion, helping fund noise and environmental mitigation costs, and financing small state and community airports  The main financial advantage of AIP to airports is that, as a grant program, it can provide funds for capital projects without the financial burden of debt financing, although airports are required to provide a modest local match to the federal funds  Limitations on the use of AIP grants include the range of projects that AIP can fund and the requirement that recipients adhere to all program regulations and grant assurances  Federal law requires the Secretary of Transportation to publish a national plan for the development of public-use airports in the United States  This appears as a biannual Federal Aviation Administration (FAA) publication called the National Plan of Integrated Airport System s (NPIAS)   For an airport to receive AIP funds, it must be listed in the NPIAS  AIP program structure and authorizations are set in FAA authorization acts  Modifications have been made to AIP through the years, but the basic program structure remains the same  The most recent act, the FAA Reauthorization Act of 2018 ( P L  115-254 ), authorized AIP funding through FY2023  The trust fund was designed to assure an adequate and consistent source of funds for federal airport and airway programs  It is the primary funding source for most FAA activities in addition to federal grants to airports  These include facilities and equipment (F&E); research, engineering, and development (R, E&D); and FAA operations and maintenance (O&M)  Congress determines how much the trust fund will be allowed to expend for various purposes, including the AIP  The money flowing into the Airport and Airway Trust Fund comes from a variety of aviation-related taxes  These taxes were authorized by the Taxpayer Relief Act of 1997 ( P L  105-34 ) and reauthorized by the 2018 FAA reauthorization act  Revenue sources include the following: 7 5% ticket tax, $4 20 flight segment tax, 6 25% tax on cargo waybills, 4 4 cents per gallon on commercial aviation fuel, 19 4 cents per gallon on general aviation gasoline, 21 9 cents per gallon on general aviation jet fuel, 14 1 cents per gallon fractional ownership surtax on general aviation jet fuel, $18 60 international arrival tax, $18 60 international departure tax, and 7 5% "frequent flyer" award tax  In most years since the trust fund was established, the revenues plus interest on the unexpended balances brought in more money than was being paid out  This led to the growth in the end-of-year unexpended balances in the trust fund  At times these unexpended balances are inaccurately referred to as a surplus  In practice, FAA may have committed unexpended balances to fund particular airport projects, so those balances may not be available for other purposes  Most air carriers have altered their pricing structures in ways that have implications for the trust fund  Ancillary fees are now commonly charged for services such as checked baggage that in the past were included in the ticket price  Such fees are not subject to the 7 5% ticket tax  Had the $4 57 billion in baggage fees collected in 2017 been subject to the ticket tax, the trust fund might have received more than $343 million in additional revenue  AIP spending authorized and the amounts actually made available for grants from the aviation trust fund since FY2000 are illustrated in Table 1   After trending upward from FY1982 to FY1992, grant funding approved in annual appropriations declined through the mid-1990s as part of federal deficit reduction efforts, leaving large gaps between authorized AIP spending levels and the amounts the program was actually allowed to expend  This occurred despite provisions in place since 1976 designed to ensure that federal capital spending for airports is fully funded at the authorized level (see Text B ox )  The Wendell H  Ford Aviation Investment and Reform Act for the 21 st Century (AIR21; P L  106-181 ), enacted in 2000, provided major increases in AIP's authorization, starting in FY2001  During FY2001-FY2006 AIP was funded near its fully authorized levels  The amount available for grants peaked at $3 47 billion in FY2008  From FY2008 through FY2011, when AIP was authorized by a series of authorization extension acts, appropriators set the program's annual obligation limitation at $3 515 billion  The 2012 FAA Modernization and Reform Act authorized funding through FY2015 at an annual level of $3 35 billion  In July 2016, the FAA Extension, Safety, and Security Act of 2016 ( P L  114-190 ) was passed to further extend the authorization of AIP at the annual level of $3 35 billion through September 30, 2017  The 115 th Congress passed a six-month extension ( P L  115-63 ) of aviation funding and programs through the end of March 2018  Subsequently, the Consolidated Appropriations Act, 2018 ( P L  115-141 ), provided a further extension through the end of FY2018  In addition to the annual funding of $3 35 billion, the 2018 appropriations act provided a $1 0 billion appropriation from the general fund to the AIP discretionary grants program  The Secretary of Transportation was directed to keep this supplemental funding available through September 30, 2020, and to give priority to nonprimary, nonhub, and small hub airports  These supplemental funds are not included in the AIP funding summary or discussion in this report, as FAA is in the process of evaluating applications and distributing funds  The FAA Reauthorization Act of 2018 ( P L  115-254 ) funded AIP from FY2019 through FY2023 at an annual level of $3 35 billion  It also authorized supplemental annual funding from the general fund to the AIP discretionary grants program ($1 02 billion in FY2019, $1 04 billion in FY2020, $1 06 billion in FY2021, $1 09 billion in FY2022, and $1 11 billion in FY2023), and required at least 50% of these additional funds to be available to nonhub and small hub airports  In February 2019, Congress passed the Consolidated Appropriations Act, 2019 ( P L  116-6 )  The act provided a $500 million supplemental appropriation from the general fund to the AIP discretionary grants program and required that this money remain available through September 30, 2021  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  Each year the entitlements are first apportioned by formula to specific airports or types of airports  Once the entitlements are satisfied, the remaining funds are defined as discretionary funds  Airports apply for discretionary funds for projects in their airport master plans  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  Grants are generally awarded directly to airports  Legislation sets forth definitions of airports that are relevant both in discussions of the airport system in general and of AIP funding distribution in particular (see Appendix B )  The statutory provisions for the allocation of both formula and discretionary funds are based on these definitions  Entitlements are funds that are apportioned by formula to airports and may generally be used for any eligible airport improvement or planning project  These funds are divided into four categories: primary airports, cargo service airports, general aviation airports, and Alaska supplemental funds (see Appendix B for a full list of airport definitions)  Each category distributes AIP funds by a different formula (49 U S C  §47114)  Most airports have up to three years to use their apportionments  Nonhub commercial service airports have up to four years  The formula distributions are contingent on an annual AIP obligation limitation of $3 2 billion or more  If this threshold is not met in a particular fiscal year, most formulas revert to prior authorized funding formulas  Primary Airports  The apportionment for airports that board more than 10,000 passengers each year is based on the number of boardings (also referred to as enplanements) 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: $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 allocation to any primary airport is $1 million  The maximum is $26 million  Cargo Service Airports  Some 3 5% of AIP funds subject to apportionment are apportioned to airports served by all-cargo aircraft with a total annual landed weight of more than 100 million pounds  The allocation formula is the proportion of the individual airport's landed weight to the total landed weight at all cargo service airports  General Aviation Airports  General aviation, reliever, and nonprimary commercial service airports are apportioned 20% of AIP funds subject to apportionment  From this share, all airports, excluding all nonreliever primary airports, receive the lesser of the following: $150,000; or one-fifth of the estimated five-year costs for airport development for each of these airports as listed in the most recent NPIAS  Any remaining funds are distributed according to a state-based population and area formula  FAA makes the project decisions on the use of these funds in consultation with the states  Although FAA has ultimate control, some states view these funds as an opportunity to address general aviation needs from a statewide, rather than a local or national, perspective  Alaska Supplemental Funds  Funds are apportioned to airports in Alaska to assure that Alaskan airports receive at least twice as much funding as they did under the Airport Development Aid Program 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 forgo or give back 50% of their AIP formula grants  In the case of PFC above the $3 level the percentage forgone is 75%  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%  The discretionary funds (49 U S C  §§47115-47116) include the money not distributed under the apportioned entitlements, as well as the forgone PFC revenues that were not deposited into the small airport fund  AIP discretionary funding for FY2018 was about 9 4% of the total AIP funding  Discretionary grants are approved by FAA based on project priority and other selection criteria  Figure 1 illustrates the composition of both apportioned and discretionary grants, based on FY2018 data  Despite its name, the discretionary fund is not allocated solely at FAA's discretion  Allocations are subject to the following three set-asides and certain other spending criteria: Airport Noise Set-Asides   At least 35% of discretionary funds are set aside for noise compatibility planning and for carrying out noise abatement and compatibility programs  Military Airport Program   At least 4% of discretionary funds are set aside for conversion and dual use of up to 15 current and former military airports  The program allows funding of some projects not normally eligible under AIP  Grants for Reliever Airports   There is a set-aside of two-thirds of 1% of discretionary funds 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%, FAA is required to set aside $5 million for the testing and evaluation of innovative aviation security systems  Subject to these limitations and the three set-asides, the Secretary of Transportation, through FAA, has discretion in distribution of grants from the remainder of the discretionary fund  Under this program, FAA provides funds directly to participating states for projects at airports classified as other than primary 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  Each block grant state is responsible for project administration as well as most of the inspection and oversight roles normally assumed by FAA  The states that currently participate in the state block grant program are Georgia, Illinois, Michigan, Missouri, New Hampshire, North Carolina, Pennsylvania, Tennessee, Texas, and Wisconsin  For AIP 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: 75% for large and medium hub airports (80% for noise compatibility projects); 90% for other airports; "not more than" 90% for airport projects in states participating in the state block grant program; 70% for projects funded from the discretionary fund at airports receiving exemptions under 49 U S C  §47134, the pilot program for private ownership of airports; airports reclassified as medium hubs due to increased passenger volumes may retain eligibility for up to a 90% federal share for a two-year transition period; certain economically distressed communities receiving subsidized air service may be eligible for up to a 95% federal share of project costs  This cost-share structure means that smaller airports pay a lower share of AIP-funded project costs than larger airports  The airports themselves must raise the remaining share from other sources  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  This is particularly the case for noncommercial airports, such as general aviation and reliever airports, which received over 25% of AIP grants distributed in FY2018  Air carriers have objected to this allocation, pointing out that their passengers and freight shippers pay the vast majority of revenue flowing into the trust fund  General aviation interests, however, defend AIP grants to noncommercial airports  Figure 2 shows the share of AIP grants awarded in FY2018, by value, broken out by airport type  Figure 3 displays AIP grants awarded by type of project for FY2018  For the most part, AIP development grants support "airside" development projects such as runways, taxiways, aprons, navigation 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  In cases in which a primary or reliever airport may want to begin an AIP-eligible project without waiting for the funds to become available, FAA is authorized to issue a letter of intent (LOI)  If it does so, the LOI states that eligible project costs, up to the allowable federal share, will be reimbursed according to a schedule set forth in the letter  Although the LOI technically does not obligate the federal government, it is an indication of 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 interest rates  The airport may proceed with the project with assurance that all AIP-allowable costs specified in the LOI will remain eligible for reimbursement over the life of the LOI  Both entitlement and discretionary funds are used to fulfill LOIs  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, 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 " 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 economic discrimination (against all types, kinds, and classes of aeronautical activities); charging air carriers making similar use of the airport substantially comparable amounts; maintaining a current airport layout plan; making financial reports to FAA; and expending airport revenue only on capital or operating costs at the airport  Within the AIP context, assurances are a means of guaranteeing the implementation of federal policy  Obligations derived from airports' assurances extend beyond the formal closure of AIP grant-supported projects  Obligations related to the use, operation, and maintenance of an airport remain in effect for the expected life of the improvement, up to 20 years  In the case of the purchase of land with AIP funds, the federal obligations do not expire  Airports may request that FAA release them from their AIP contractual obligations  Typically, as a condition of the release, the airport sponsor must either reimburse the federal government for the AIP grants (in the case of land grants, the federal share of the fair market value of the land) or reinvest the amount in an approved AIP project (see Text B ox )  When airport managers or interest groups express concerns about the "strings attached" to AIP funding, they are usually referring to AIP grant assurances  In 1990, federal deficits and expected tight budgets led to concerns that the Airport and Airway Trust Fund and other existing sources of funds for airport development would be insufficient to meet national airport needs  This led to authorization of a new user charge, the Passenger Facility Charge (PFC)  The PFC was seen as a complementary funding source to AIP  The Aviation Safety and Capacity Expansion Act of 1990 allowed the Secretary of Transportation to authorize public agencies that control commercial airports to impose a fee on each paying passenger boarding an aircraft at their airports  Initially, there was a $3 cap on each airport's PFC and a $12 limit on the total PFCs that a passenger could be charged per round trip  The PFC is a state, local, or port authority fee, not a federally imposed tax deposited into the Treasury  Because of the complementary relationship between AIP and PFCs, PFC provisions are generally folded into the sections of FAA reauthorization legislation dealing with AIP  The money raised from PFCs must be used to finance eligible airport-related projects  Unlike AIP funds, PFC funds may be used to service debt incurred to carry out projects  Legislation in 2000 raised the PFC ceiling to $4 50, with an $18 limit on the total PFCs that a passenger can be charged per round trip  To impose a PFC above $3 an airport has to show that the funded projects will make significant improvements in air safety, increase competition, or reduce congestion or noise impacts on communities, and that these projects could not be fully funded by using the airport's AIP formula funds or AIP discretionary grants  Large and medium hub airports imposing PFCs above the $3 level forgo 75% of their AIP formula funds  PFCs at large and medium hub airports may not be approved unless the airport has submitted a written competition plan to FAA, which includes information about the availability of gates, leasing arrangements, gate-use requirements, controls over airside and ground-side capacity, and intentions to build gates that could be used as common facilities  The FAA Modernization and Reform Act of 2012 included minor changes to the PFC program  The act made permanent the trial program that authorized nonhub small airports to impose PFCs  The act also required GAO to study alternative means of collecting PFCs without including the PFC in the ticket price  The FAA Reauthorization Act of 2018 did not include significant changes to the PFC program and maintained the $4 50 PFC cap, with a maximum charge of $18 per round-trip flight  It did include a provision, however, that required a qualified organization to conduct a study assessing the infrastructure needs of airports and existing financial resources for commercial service airports and to make recommendations on the actions needed to upgrade the national aviation infrastructure system  Unlike AIP grants, of which over 67% in FY2018 went to airside projects (runways, taxiways, aprons, and safety-related projects), PFC revenues are heavily used for landside projects, such as terminals and transit systems on airport property, and for interest payments  Table 2 shows the AIP grant awards and PFC approvals by project type in FY2018  Annual system-wide PFC collections grew from $85 4 million in 1992 to over $3 4 billion in 2018  The PFC statutory language lends itself to a broader interpretation of "capacity enhancing" projects, and the implementing regulations are less constraining than those for AIP funds  Air carriers, which historically have preferred funding to be dedicated to airside projects, must be notified and provided with an opportunity for consultation about airports' proposals to fund projects with PFC revenues  They are generally less involved in the PFC project planning and decisionmaking process than is the case with AIP projects  The difference in the pattern of project types may also be influenced by the fact that larger airports, which collect most of the PFC revenue, tend to have substantial landside infrastructure, whereas smaller airports that are much more dependent on AIP funding have comparatively limited landside facilities  Bonds have long been a major source of funding for capital projects at primary airports  According to Bond Buyer, a trade publication, airports raised approximately $17 4 billion in 84 bond issues in 2018, a substantial increase over the $14 7 billion raised in 116 issues in 2017  Most airport-related bonds are classified as tax-exempt private activity bonds (PABs)  These bonds, issued by a local government or public authority, allow the use of landing fees, charges on airport users, and property taxes on privately controlled on-airport buildings, such as cargo facilities, to service debt without obligating tax revenue  Their tax-exempt status enables airports to raise funds more cheaply than would otherwise be the case because investors enjoy a federal income tax exclusion on interest paid on the bonds  In some cases, revenue from PFCs may be used to service the bonds  PABs may be used to build facilities that are directly related and essential to servicing aircraft, enabling aircraft to take off and land, and transferring passengers or cargo to or from aircraft  Normally, airport bonds might be classified as taxable PABs because they are used to finance facilities where more than 90% of the activity is private and more than 90% of the repayment is from revenue generated by the facility  Issuers of taxable PABs must pay higher interest rates than required on tax-exempt bonds, to compensate investors for the taxes due on interest income  Congress therefore created an exception allowing airports that are owned by governmental entities to issue "qualified" PABs that are tax-exempt   The majority of airport bonds are considered by the Internal Revenue Service to be "qualified" PABs  Some recent proposals would allow privately owned airports to receive the same tax-preferred treatment of their bonds as airports owned by public authorities  A possible precedent for this is the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users ( P L  109-59 , §1143; SAFETEA-LU), which allowed for up to $15 billion in tax-exempt bond financing for highways or freight transfer facilities that would otherwise not qualify for tax-exempt financing  Many of the supporters of the SAFETEA-LU provisions envisioned expanded eligibility for PABs as a means of facilitating public-private partnerships between a public authority and an outside investor  In the airport context, this would be analogous to an airport authority agreeing to a long-term lease with a private investor who would have the ability to enter the market for tax-exempt bonds to finance improvements at the airport and, perhaps, also to finance the purchasing costs of the lease itself  By statute, the safe operation of airports is the highest aviation priority  Other priorities established by Congress include increasing capacity to the maximum feasible extent, minimizing noise impacts, and encouraging efficient service to state and local communities (i e

ground_truth: Each year, DOD spends billions of dollars to develop, produce, and field large, complex satellites. For such satellite systems, a single adversary attack or on-orbit failure can result in the loss of billions of dollars of investment and significant loss of vital capabilities. As DOD plans new space systems and addresses an increasingly contested space environment, it has the opportunity to consider different acquisition approaches. One such approach is to integrate a government sensor or payload onto a commercial host satellite. House Armed Services Committee report 115-200, accompanying a bill for the Fiscal Year 2018 National Defense Authorization Act, included a provision for GAO to review DOD's use of commercially hosted payloads. This report (1) determines the extent to which DOD uses commercially hosted payloads and (2) describes and assesses factors that affect their use. GAO reviewed DOD policies, documentation, and planning documents, and interviewed a wide range of DOD and civil government officials, and commercial stakeholders. GAO and others have found that using commercial satellites to host government sensors or communications packages—called payloads—may be one way DOD can achieve on-orbit capability faster and more affordably. Using hosted payloads may also help facilitate a proliferation of payloads on orbit, making it more difficult for an adversary to defeat a capability. Since 2009, DOD has used three commercially hosted payloads, with three more missions planned or underway through 2022 (see figure below). DOD estimates that it has achieved cost savings of several hundred million dollars from using commercially hosted payloads to date, and expects to realize additional savings and deliver faster capabilities on orbit from planned missions. Cost savings can result from sharing development, launch, and ground system costs with the commercial host company. Among the factors that affect DOD's use of hosted payloads are a perception among some DOD officials that matching government payloads to commercial satellites is too difficult; and limited, fragmented knowledge on how to mitigate various challenges GAO found that further opportunities to use hosted payloads may emerge as DOD plans new and follow-on space systems in the coming years. However, DOD's knowledge on using hosted payloads is fragmented, in part because programs are not required to share information. In 2011, the Air Force created a Hosted Payload Office to provide expertise and other tools to facilitate matching government payloads with commercial hosts. However, GAO found that DOD programs using hosted payloads are not required and generally do not provide cost and technical data, or lessons learned, to the Hosted Payload Office, or another central office for analysis. Requiring programs that use hosted payloads agency-wide to provide this information to a central location would better position DOD to make informed decisions when considering acquisition approaches for upcoming space system designs. GAO recommends that DOD require programs using commercially hosted payloads to contribute resulting data to a central location. In implementing this recommendation, DOD should assess whether the Air Force's Hosted Payload Office is the appropriate location to collect and analyze the data. DOD concurred with the recommendation.

prompt_front: You are given two reports by the government agency.



Question: Write a one-page summary of the report 2.



Report 2: , support for general aviation airports)  But there are significant disagreements about the appropriate degree of federal participation in airport development and finance and about the specific types of expenditure that should be given priority within AIP  Airline and airport operators tend to view the fully authorized funding of the program as a good thing  An alternative view, however, is that too much has been spent on AIP, particularly at smaller airports that do not play a significant role in commercial aviation  The assessment of airport capital needs is fundamental to determining the appropriate federal support needed to foster a safe and efficient national airport system  The federal government's interest goes beyond capacity issues to include implementation of federal safety and noise policies  Both FAA and the Airports Council International-North America (ACI-NA) have issued projections of airports' long-term financial needs  In its most recent NPIAS report, FAA estimated that the national system's capital needs for FY2019-FY2023 will total $35 1 billion (an annual average of approximately $7 billion)  The ACI-NA infrastructure needs survey resulted in an estimate of $128 1 billion over the same years (an annual average of approximately $25 6 billion)  The main reason for the widely differing estimates was disparate views on what kinds of airport projects to include  The NPIAS report was based on information taken from airport master plans and state system plans, but FAA planners screened out planned projects not justified by aviation activity forecasts or not eligible for AIP grants  Only designated NPIAS airports were included in the FAA 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, or in some cases even begun, within the range of years covered in the NPIAS estimates  ACI-NA argues that the NPIAS underestimates AIP eligible needs because not all such needs will be in the current airport plans  The ACI-NA study reflects the broader business view of major airport operators and casts a substantially wider net  It includes projects funded by PFCs, bonds, or state or 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, and 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  Its 2019-2023 infrastructure needs survey, for example, included major airport terminal projects that are ineligible for AIP grants  The ACI-NA study also includes projects without identified funding sources  The ACI-NA estimate is higher than the FAA estimate because of the wider net it casts and because it is adjusted for projected inflation  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 in evaluating appropriate AIP funding levels as that of the NPIAS projections  On the other hand, the broader ACI-NA estimate may be more significant for policy choices related to bond issuance and PFCs, since these sources fund a broader range of projects than AIP  In 2004, then-FAA Administrator Marion C  Blakey stated that the agency's goal was to increase total capacity at the top 35 U S  airports by 30% over a 10-year period  FAA's Operational Evolution Plan (OEP) is intended to increase the capacity and efficiency of the National Airspace System (NAS) over a 10-year period to keep up with the expected growth in demand for air travel and air cargo  In support of that goal, FAA released a study focused on the 35 busiest airports, Capacity Needs in the National Airspace System: An Analysis of Airport and Metropolitan Area Demand and Operational Capacity in the Future (also referred to as FACT1)  The study projected 18 airports would need additional capacity by 2020  In 2007, FACT1 was updated by a second study, FACT2  FACT2 expanded the study to include 21 non-OEP airports that were identified as having the potential to be capacity constrained or were in capacity-constrained metropolitan areas  The study examined airports that would need capacity increases and also projected which airports would need capacity increases in 2015 and 2025  It identified four airports plus the New York metropolitan area that needed additional capacity in 2007  It further identified 14 hub airports as likely to be capacity-constrained in 2025  FACT2 found that, in comparison to FACT1, many non-OEP airports "    have higher capacities than originally presumed and thus less need for additional capacity " A further update, FACT3, was released in January 2015  FACT3 forecasted that the 2007-2009 recession, volatile fuel costs, airline consolidation, and replacement of many 50-seat regional jets with larger aircraft would result in 32% fewer operations and about 23% fewer enplanements in 2025 at the 30 core airports than forecast in FACT2  It projected that airport delays would remain concentrated at a few major hub airports, notably the three New York City-area airports, Philadelphia International Airport, and Hartsfield-Jackson Atlanta International Airport  This study may have implications for the reauthorization of AIP  The 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  At large and medium hub airports, runway projects are usually paid for, in part, by AIP funds  Therefore, some projects needed by 2025 may require AIP funding in earlier years  Because large and medium airports that levy PFCs must forgo either 50% or 75% of their AIP formula entitlement funds, most federal funding for their runway projects would probably need to take the form of AIP discretionary funds  The pool of discretionary funds is primarily the remainder of annual funding after the entitlement formula requirements are satisfied  Of the forgone PFC funds, 87 5% are reserved for the small airport fund and are also not available for OEP airports  If the AIP budget is constrained in the future, either under a reauthorization bill or during the annual appropriations process, and the entitlement formulas remain as they are, the discretionary portion of the AIP budget may be squeezed, limiting large airports' ability to draw on AIP funds for major capacity expansion projects  Many of the attributes of AIP's programmatic structure are similar to those of the 1982 act that created the program  Over the years these attributes have been modified based on perceived needs and on the practical politics of passing the periodic FAA reauthorization bills that contain the AIP provisions  These considerations make a major overhaul of the AIP structure unlikely, but may leave room for programmatic adjustments in the distribution of apportionments  One such adjustment might shift AIP funds to enhancing capacity at large and medium hub airports  There are several ways Congress might accomplish this  One would be to eliminate the requirement that large and medium hub airports that impose the maximum PFCs forgo 75% of their entitlements  This change would give larger airports a greater share of entitlement funding, but at the cost of reducing AIP grants to small airports  Alternatively, changes in the statutory set-asides of discretionary funds could give FAA more flexibility to use that money for capacity enhancement, but might reduce funding for noise mitigation and other purposes  Changes in the last several FAA authorization acts increased entitlements and broadened the range of landside projects eligible for AIP grants  These changes generally benefitted airports smaller than medium hub size  In particular, the increased amount of apportioned funds has limited the availability of funds for discretionary grants at major airports  Further changes giving airports increased flexibility in the use of their entitlements might benefit smaller airports not served by commercial aviation, in line with the national goal of having an "extensive" national airport system, but this use of funds might conflict with the goal of reducing congestion at major commercial airports  The current apportionment system relies on a $3 2 billion funding level trigger mechanism to lift most of the apportionments to twice their formula level  This has been in place for two reauthorization cycles  Should that trigger be breached, entitlements for all airports would be reduced drastically  The entitlement formulas may not be sustainable, without depleting discretionary funds, in the absence of additional funding for AIP  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 AIP and rely exclusively on PFCs to finance capital projects  This would require raising or eliminating the federal cap on PFCs  These "defederalized" airports could then be released from some or all of the AIP grant assurances under which they now operate, such as land use requirements and airport revenue use restrictions  If airports exit the program, AIP spending could be reduced or could be redirected to other NPIAS airports  Airport privatization denotes a change in ownership from a public entity (such as a local government or an airport authority established by a state government) to a private one  In a number of countries, such as Great Britain, government-owned airports have been privatized by sale to private owners  In the United States, some airports have allowed private ownership of certain on-airport facilities or management functions, but the ownership of all major airports remains in the hands of government entities  The Airport Privatization Pilot Program (49 U S C  §47134; Section 149 of the Federal Aviation Reauthorization Act of 1996, P L  104-264 , as amended) authorizes FAA to exempt up to 10 airports from certain federal restrictions on the use of airport revenue off-airport  Participating airports may be also exempted from certain requirements on the repayment of federal grants  Privatized airports may still participate in the AIP, but at a lower federal share (70%)  The pilot program was renamed the Airport Investment Partnership Program (AIPP) in the 2018 FAA reauthorization act and expanded to admit more than 10 airports  The AIPP provides that at primary airports, the airport sponsor may only recover from the sale or lease an amount approved by at least 65% of the scheduled air carriers serving the airport, as well as by both scheduled and unscheduled air carriers that together account for 65% of the total landed weight at the airport for the year  The requirement that air carriers approve the use of airport revenue for nonairport purposes, such as profit distribution, may have served to limit interest in the program  To date, only two airports have completed the privatization process established under the provisions of the AIPP  One of those, Stewart International Airport in New York State, subsequently reverted to public ownership when it was purchased by the Port Authority of New York and New Jersey  Luis Muñoz Marín International Airport in San Juan, PR, is now the only commercial service airport operating under private management after privatization under the APPP  As of 2018, there are three applicants under active FAA consideration: Hendry County Airglades Airport in Clewiston, FL; Westchester Airport in White Plains, NY; and St  Louis Lambert International Airport in St  Louis, MO  There is no certainty that any AIP cost savings from privatization would be retained for use by the other AIP-eligible airports  AIP spending is determined by the authorization and appropriations process, and Congress could choose to use any savings to reduce the program size, to marginally assist in deficit reduction, to reduce general fund portions of FAA operations funding, or to make money available for spending elsewhere  Debate over FAA reauthorization generally brings forth proposals to alter the AIP grant assurances, such as ensuring that workers on airport construction projects receive prevailing wages set under the Davis-Bacon Act and pledging to use airport revenue solely for spending on airport operations and capital costs  If AIP spending remains constrained, critics are likely to argue that the grant assurances raise the cost of projects to increase airport capacity and complicate the closure and reuse of underutilized airports or airports that are locally unpopular due to noise or safety concerns  Historically, a basic funding issue is whether to change the existing discretionary fund set-aside for noise mitigation and abatement  The noise set-aside, however, has been increased in previous reauthorization acts and is now 35% of discretionary funding  Demand to use AIP funds for noise mitigation could increase if Congress grants FAA the flexibility to fund noise mitigation projects that are outside the DNL 65 decibel (dB) noise impact area, but this could divert resources from capacity and safety projects  A related issue is whether to make the planning for noise-mitigating air traffic control procedures at individual airports eligible for AIP funding  The central issue related to PFCs is whether to raise the $4 50 per enplaned passenger ceiling or to eliminate the ceiling altogether  In general, airports argue for increasing or eliminating the ceiling, whereas most air carriers and some passenger advocates oppose higher limits on the PFCs  A 2015 GAO study analyzed the effects by raising the PFC cap under three scenarios: setting the cap at $6 47, $8 00, or $8 50  The study found raising PFC would significantly increase airport funding, but could also marginally slow passenger growth and therefore the growth in revenues to the trust fund  PFC supporters feel that the PFC is more reliable than AIP funding, which is subject to the authorization and appropriations process  They also argue that PFCs are procompetitive, helping airports build gates and facilities that both encourage new entrant carriers and allow incumbent carriers to expand  Advocates of an increase in the cap also argue that over time, the value of the PFC has been eroded by inflation and an adjustment is therefore necessary  The permissible uses of revenues are an ongoing point of contention  Airport operators, in particular, would like more freedom to use PFC funds for off-airport projects, such as transportation access projects, and want the process of obtaining FAA approval to be streamlined  Carriers, on the other hand, often complain that airports use PFC funds to finance proposals of dubious value, especially outside airport boundaries, instead of high-priority projects that offer meaningful safety or capacity enhancements  The major air carriers are also unhappy with their limited influence over project decisions, as airports are required only to consult with resident air carriers instead of having to get their agreement on PFC-funded projects  Unlike interest income from governmental bonds, which is not subject to the alternative minimum tax (AMT), interest from private activity bonds is still subject to the AMT  ACI-NA has proposed broadening the definition of governmental 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  Opponents of such changes express concerns that these changes would 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 including a specific exemption 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  Appendix A  Legislative History of Federal Grants-in-Aid to Airports Prior to World War II the federal government viewed airports as a local responsibility  During the 1930s, it spent about $150 million a year on airports through work relief agencies such as the Works Progress Administration (WPA)  The first federal support for airport construction was granted during World War II  After the war, the Federal Airport Act of 1946 (P L  79-377) created the Federal Aid to Airports Program, using funds appropriated annually from the general fund  Initially much of this spending supported conversion of military airports to civilian use  In the 1960s substantial funding went to upgrade and extend runways for use by commercial jets  By the end of the 1960s, congestion, both in the air and on the ground at U S  airports, was seen as evidence that airport capacity was inadequate  Airport and Airway Development and Revenue Acts of 1970 (P L  91-258) In 1970, Congress responded to the capacity concerns by passing two acts  The first, the Airport and Airway Development Act (Title I of P L  91-258), established 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  The second, the Airport and Airway Revenue Act of 1970 (Title II of P L  91-258), established the Airport and Airway Trust Fund  Revenues from levies on aviation users and fuel were dedicated to the fund  Under the 1970 acts the trust fund could pay capital costs and, when excess funds existed, could also help cover FAA's administrative and operations costs  Airport and Airway Development and Revenue Acts Amendments of 1971 (P L  92-174) 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  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  The 1971 Amendments Act made the trust fund a capital-only account (although only through FY1976), disallowing the use of trust fund revenues for FAA operations  Airport and Airway Development Amendments Act of 1976 ( P L  94-353 ) The 1976 act made a number of adjustments to the ADAP and reauthorized the Airport and Airway 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  This cap was altered multiple times in reauthorization acts in the following decades  ADAP grants totaled about $4 1 billion from 1971 through 1980  Congress did not pass authorizing legislation for ADAP during FY1981 and FY1982, during which the aviation trust fund lapsed, although spending for airport grants continued  Airport and Airway Improvement Act of 1982 ( P L  97-248 ) The 1982 act created the current AIP and reactivated the Airport and Airway Trust Fund  It altered the funding distribution among the newly defined categories of airports, 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, the National Plan of Integrated Airport Systems (NPIAS) , identifies airports that are considered important to the national aviation system  For an airport to receive AIP funds it must be listed in the NPIAS  Although the 1982 act was amended often in the 1980s and early 1990s, the general structure of AIP remained the same  The Airport and Airway Safety and Capacity Expansion Act of 1987 ( P L  100-223 ; 1987 act) authorized significant spending increases for AIP and added a cargo service apportionment  It also included provisions to encourage full funding of AIP at the authorized level  Title IX of P L  101-508 , the Omnibus Budget Reconciliation Act of 1990 (OBRA1990), 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 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 (OBRA 1990, Title IX, Subtitle D) set a national aviation noise policy  OBRA1990 included the Revenue Reconciliation Act of 1990, which reauthorized the Aviation Trust Fund and adjusted some of the aviation taxes  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  Federal Aviation Reauthorization Act of 1996 ( P L  104-264 ) The 1996 reauthorization of the AIP made a number of adjustments to entitlement funding and discretionary set-aside provisions  It also included directives concerning intermodal planning, cost reimbursement rules, letters of intent, and the small airport fund  A demonstration airport privatization program and a demonstration program for innovative financing techniques were established  The demonstration status of the state block grant program was removed  The act did not reauthorize the taxes that supported the Airport and Airway 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 through September 30, 2007  The Wendell H  Ford Aviation Investment and Reform Act for the 21 st Century of 2000 (AIR21; P L  106-181 ) The enactment of AIR21 was the culmination of two years of legislative effort to pass a multiyear FAA reauthorization bill  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 "guarantee" that all of each year's receipts and interest credited to the trust fund would be made available annually for aviation purposes  AIR21 did not make major changes in the structure or functioning of AIP  It did, however, greatly increase the amount available for airport development projects  The AIP funding authorization rose from $1 9 billion in FY2000 to $3 4 billion in FY2003  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 forgo 75% of their AIP formula funds  This had the effect of making a greater share of AIP funding available to smaller airports  Vision 100: Century of Aviation Reauthorization Act of 2003 ( P L  108-176 ; H Rept  108-334 ) Vision 100, signed by President George W  Bush on December 12, 2003, included significant changes to AIP  The law codified the AIR21 spending "guarantees" through FY2007  It 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 nonprimary airports to use their entitlements for revenue-generating aeronautical support facilities, including fuel farms and hangars, if the Secretary of Transportation determines that the sponsor has made adequate provisions for the airside needs of the airport  The law permitted AIP grants at small airports to be used to pay interest on bonds issued to finance airport projects  The act included a trial 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  FAA Modernization and Reform Act of 2012 ( P L  112-95 ) The 2012 FAA reauthorization act funded AIP for four years from FY2012 to FY2015 at an annual level of $3 35 billion  A new provision, Section 138, permitted small airports reclassified as medium hubs due to increased passenger volumes to retain eligibility for up to a 90% federal share for a two-year transition period  This provision also allows certain economically distressed communities receiving subsidized air service to be eligible for up to a 95% federal share of project costs  The 2012 act maintained the $4 50 PFC cap, with a maximum charge of $18 per round-trip flight  It included a provision that instructed GAO to study alternative means for collecting PFCs  The act also expanded the number of airports that could participate in the airport privatization pilot program from 5 to 10  This law was extended through July 15, 2016  The FAA Extension, Safety, and Security Act of 2016 ( P L  114-190 ) The 2016 FAA extension act funded AIP through FY2017 at an annual level of $3 35 billion  A new provision, Section 2303, provided temporary relief to small airports that had 10,000 or more passenger boardings in 2012 but had fewer than 10,000 during the calendar year used to calculate the AIP apportionment for FY2017  This provision allowed such airports to receive apportionment for FY2017 an amount based on the number of passenger boardings at the airport during calendar year 2012  The FAA Reauthorization Act of 2018 ( P L  115-254 ) The 2018 FAA reauthorization act funded AIP for five years from FY2019 through FY2023 at an annual level of $3 35 billion  It also authorized supplemental annual funding from the general fund to the AIP discretionary funds—$1 02 billion in FY2019, $1 04 billion in FY2020, $1 06 billion in FY2021, $1 09 billion in FY2022, and $1 11 billion in FY2023—and required at least 50% of the additional discretionary funds to be available to nonhub and small hub airports  The act included a provision permitting eligible projects at small airports (including those in the State Block Grant Program) to receive 95% federal share of project costs (otherwise capped at 90%), if such projects are determined to be successive phases of a multiphase construction project that received a grant in FY2011  The 2018 reauthorization expanded the number of states that could participate in the State Block Grant Program from 10 to 20 and also expanded the existing airport privatization pilot program (now renamed the Airport Investment Partnership Program) to include more than 10 airports  The law included a provision that forbids states or local governments from levying or collecting taxes on a business on an airport that "is not generally imposed on sales or services by that State, political subdivision, or authority unless wholly utilized for airport or aeronautical purposes " Appendix B  Definitions of Airports Included in the NPIAS Commercial Service Airports Publicly owned airports that receive scheduled passenger service and board at least 2,500 passengers each year (506 airports)  Primary Airports   Airports that board more than 10,000 passengers each year  There are four subcategories: Large Hub Airports   Board 1% or more of system -wide boardings ( 30 airports, 72 % of all enplanements)Medium Hub Airports   Board 0 25% but less than 1% (31 airports, 16% of all enplanements) Small Hub Airports   Board 0 05% but less than 0 25% (72 airports, 8% of all enplanements) Non hub Primary Airports   Board more than 10,000 but less than 0 05% (247 airports, 3% of all enplanements) Non primary Commercial Service Airports   Board at least 2,500 but no more than 10,000 passengers each year (126 airports, 0 1% of all enplanements)  Other Airports General Aviation Airports   General aviation airports do not receive scheduled commercial or military service but typically do support business, personal, and instructional flying; agricultural spraying; air ambulances; on-demand air-taxies; and/or charter aircraft service (2,554 airports)  Reliever Airports   Airports designated by FAA to relieve congestion at commercial airports and provide improved general aviation access (261 airports)  Cargo Service Airports   Airports served by aircraft that transport cargo only and have a total annual landed weight of over 100 million pounds  An airport may be both a commercial service and a cargo service airport  New Airports Seven airports are anticipated to be built between 2019 and 2023  They include two primary airports, two nonprimary commercial service airports, and three general aviation airports 
Report 2:  residents and non-citizens for all of their U S -based property, including investments  Estates of Puerto Rico residents are required to pay the prevailing federal estate tax— which ranges from 18 percent to 40 percent depending on the size of an estate—for any U S -based property valued over $60,000  In contrast, prior to 2017, all Puerto Rico-based property was only subject to the Puerto Rico estate tax of 10 percent  Puerto Rico’s estate tax was repealed in 2017  In addition to financing from the municipal bond markets, GDB also provided an intragovernmental source of financing  Prior to April 2016, GDB acted as a fiscal agent, trustee of funds, and intergovernmental lender for the Government of Puerto Rico  GDB issued loans to Puerto Rico’s government agencies and public corporations to support their operations  GDB provided loans to government entities valued at up to 60 percent of GDB’s total assets, as shown in Figure 11  In general, these entities did not fulfill the terms of their borrowing agreements with GDB, while they independently accessed the municipal bond market  Additionally, according to GDB’s audited financial statements, GDB did not reflect loan losses in its audited financial statements until 2014 because it presumed that Puerto Rico’s legislature would repay loans through the general fund or appropriations, as generally required by the acts that approved such loans  Facing non-repayment of public sector loans, GDB took on debt to maintain liquidity  According to GDB documents, repayment of amounts owed to GDB was a main reason for the creation of the Puerto Rico Sales Tax Financing Corporation (COFINA), an entity backed by a new sales tax, through which Puerto Rico issued some of its debt  Though initially intended as a means to repay GDB and other debt, COFINA bonds were also used to finance operations  Through our interviews and an assessment of relevant literature, we identified three potential federal actions that could help address some of the factors that contributed to unsustainable indebtedness in Puerto Rico  Consistent with the provision in PROMESA that was the statutory requirement for this work, we focused on actions that were non-fiscal in nature—that is, actions that would not increase the federal deficit  There are tradeoffs for policymakers to consider when deciding whether or how to implement any policy  For each action, we describe a specific challenge as it relates to debt accumulation in Puerto Rico, identify a possible federal response to the challenge, and describe other considerations for policymakers  To help address the factors that contributed to the high demand for Puerto Rico debt relative to other municipal debt, legislative and executive branch policymakers could further ensure that municipal securities issuers provide timely, ongoing, and complete disclosure materials to bondholders and the public  Specifically, Congress could authorize SEC to establish requirements for municipal issuers on the timing, frequency, and content of initial and continuing disclosure materials  In general, the municipal securities market is less regulated and transparent than other capital markets, such as equity markets  For example, SEC’s authority to directly establish or enforce initial and continuing disclosure requirements for issuers—including those in Puerto Rico—is limited  SEC requires that underwriters (sellers of municipal securities) reasonably determine that issuers have undertaken continuing disclosure agreements (CDA) to publicly disclose ongoing annual financial information, operating data, and notices of material events  However, federal securities laws do not provide SEC with the authority to impose penalties on municipal issuers for noncompliance with CDAs, which may limit any incentive for issuers to comply with SEC disclosure and reporting guidance  As a result, SEC has limited ability to compel issuers to provide continuing disclosure information  As previously discussed, the Puerto Rico government often issued its audited financial statements in an untimely manner, thus failing to meet its contractual obligations to provide continuing disclosures for securities it issued  SEC could not directly impose any consequences on Puerto Rico’s government for failing to adhere to the terms of, or enforce compliance with, the CDAs  Additionally, as previously discussed, municipal market analysts told us that untimely financial information made it difficult for institutional and individual investors to assess Puerto Rico’s financial condition  Timely disclosure of information would help investors make informed decisions about investing in municipal securities and help protect them against fraud involving the securities  These disclosures would be made to investors at the time of purchasing securities and throughout the term of the security, including when material changes to an issuer’s financial condition occur  According to SEC staff, enhanced authority could prompt more municipal issuers to disclose financial information, including audited financial statements, in a timelier manner  For example, SEC staff said that if the agency had required that issuers provide timely financial statements at the time of issuing a municipal security, this may have precluded Puerto Rico from issuing its $3 5 billion general obligation bond in 2014  However, any rulemaking SEC would or could take as a result of enhanced authority would depend on a number of factors, such as compliance with other SEC guidance and related laws  Since this action would apply to all U S  municipal securities issuers, it has policy and implementation implications that extend well beyond Puerto Rico  For example, establishing and enforcing initial and continuing disclosure requirements for municipal securities issuers could place additional burdens on state and local issuers, and not all municipal issuers use standardized accounting and financial reporting methods  As a result, state and local governments may need to spend resources to adjust financial reporting systems to meet standardized reporting requirements  However, in a 2012 report proposing this action, SEC said it could mitigate this burden by considering content and frequency requirements that take into account, and possibly vary by, the size and nature of the municipal issuer, the frequency of issuance of securities, the type of municipal securities offered, and the amount of outstanding securities  To help address the factors that contributed to the high demand for Puerto Rico debt relative to other municipal debt, Congress could ensure that investors residing in Puerto Rico receive the same federal investor protections as investors residing in states  Specifically, Congress could subject all investment companies in Puerto Rico to the Investment Company Act of 1940, as amended (1940 Act)  In recent years, the House and Senate separately have passed legislation that would achieve this action  Certain investment companies in Puerto Rico and other territories— specifically, those whose securities are sold solely to the residents of the territory in which they are located—are exempt from the 1940 Act’s requirements  The 1940 Act regulates investment companies, such as mutual funds that invest in securities of other issuers and issue their own securities to the investing public  It imposes several requirements on investment companies intended to protect investors  For example, it requires that investment companies register with SEC and disclose information to investors about the businesses and risks of the companies in which they invest, and the characteristics of the securities that they issue  It also restricts investment companies from engaging in certain types of transactions, such as purchasing municipal securities underwritten by affiliated companies  According to a former Puerto Rico official, some broker-dealers in Puerto Rico underwrote Puerto Rico municipal securities issuances and investment companies managed by affiliated companies of these underwriters purchased the securities, packaged them into funds, and marketed the funds to investors residing in Puerto Rico  This practice would be prohibited or restricted for investment companies subject to the 1940 Act, as it might result in investment companies not acting in the best interests of their investors  If all Puerto Rico investment companies had been subject to the 1940 Act, they would have been prohibited or restricted from investing in Puerto Rico municipal bonds underwritten by affiliated companies  Also, these investment companies may have further disclosed the risks involved in Puerto Rico municipal bonds to Puerto Rico investors  As a result, demand for Puerto Rico municipal bonds from Puerto Rico investment companies and residents may have been lower had the 1940 Act requirements applied to all Puerto Rico investment companies, and it may have been more difficult for the Puerto Rico government to issue debt to finance deficits  SEC staff told us that industry groups had raised objections to extending the 1940 Act provisions to all investment companies in Puerto Rico  These industry groups noted that, among other things, certain investment companies would have difficulty meeting the 1940 Act’s leverage and asset coverage requirements and adhering to some restrictions on affiliated transactions  However, SEC staff noted that under certain legislation that passed the House or Senate separately, as described above, Puerto Rico investment companies would have three years to come into compliance if they were newly subject to the 1940 Act  Further, under that legislation, after three years, investment companies in Puerto Rico could also request an additional three years to come into compliance  Regarding affiliated company restrictions, SEC has previously waived some requirements for investment companies if they are unable to obtain financing by selling securities to unaffiliated parties with an agreement to repurchase those securities at a higher price in the future, known as repurchase agreements  According to SEC staff, SEC would consider allowing companies in Puerto Rico to enter into reverse repurchase agreements with their affiliates if the 1940 Act applied to them  To help address the factors that contributed to the high demand for Puerto Rico debt relative to other municipal debt, Congress could remove the triple tax exemption for Puerto Rico’s municipal securities  This action would mean that interest income from Puerto Rico municipal securities earned by investors residing outside of Puerto Rico could be taxed by states and local governments, while still being exempt from federal income taxes, similar to the current tax treatment of municipal bond income in the states  As mentioned previously, former Puerto Rico officials and experts in municipal securities told us that the triple tax exemption fueled investor demand and enabled Puerto Rico to continue issuing bonds despite deteriorating financial conditions  Some of the demand for Puerto Rico municipal securities came from certain U S  municipal bond funds  These funds concentrated their investments in one state to sell to investors within that state, but also included Puerto Rico bonds in their portfolios  Puerto Rico bond yields generally were higher than state bonds yields, according to industry experts  When added to a fund, the higher yields from Puerto Rico bonds would increase the overall return on investment yield of a fund  Modifying the triple tax exemption for Puerto Rico’s municipal securities might result in reduced demand for Puerto Rico’s debt  In response to reduced demand for its debt, Puerto Rico’s government may need to address any projected operating deficits by decreasing spending, raising revenues, or both  According to U S  Treasury officials, this action could increase the proportionate share of investors in Puerto Rico debt that reside in Puerto Rico, because of reduced demand from investors in the states  In the event of a future debt crisis, this could result in a concentration of financial losses within Puerto Rico  Also, debt financing allows governments to make needed capital investments and provides liquidity to governments, and can be a more stable funding source to manage fiscal stress  Reduced market demand for Puerto Rico’s bonds could make access to debt financing difficult, as the Puerto Rico bond market may not support the Puerto Rico government’s future borrowing at reasonable interest rates, according to Treasury officials  Alternately, a variant of this action would be to retain the triple tax exemption for Puerto Rico debt only for bonds related to capital investments rather than for deficit financing, according to Treasury officials  Various provisions in PROMESA were intended to help Puerto Rico improve its fiscal condition  PROMESA requires that the Oversight Board certify fiscal plans for achieving fiscal responsibility and access to capital markets  The intent of the fiscal plans is to eliminate Puerto Rico’s structural deficits; create independent revenue estimates for the budget process; and improve Puerto Rico’s fiscal governance, accountability, and controls, among other things  From March 2017 to April 2017, the Oversight Board certified the fiscal plans the Government of Puerto Rico developed for the primary government and certain component units, such as PREPA  As a result of the effects of Hurricanes Irma and Maria, the Oversight Board requested that the Government develop updated fiscal plans  Although the Government of Puerto Rico developed and submitted updated fiscal plans, the Oversight Board did not certify them, with the exception of the plan for GDB  Instead, in April 2018, the Oversight Board certified fiscal plans it developed itself, as PROMESA allows  PROMESA also requires the Oversight Board to determine whether or not Puerto Rico’s annual budgets, developed by the Governor, comply with the fiscal plans prior to being submitted to Puerto Rico’s legislature for approval  Technical assistance is another area where the federal government has taken action to help Puerto Rico address its fiscal condition  In 2015, Congress first authorized Treasury to provide technical assistance to Puerto Rico, and has continued to reauthorize the technical assistance, most recently through September 30, 2018  For example, Treasury officials told us that they helped Puerto Rico’s Planning Board develop a more accurate macroeconomic forecast, which should enable Hacienda to develop more accurate revenue estimates and receipt forecasts  Treasury officials also told us that the agency began helping Puerto Rico improve its collection of delinquent taxes—for example, by helping Hacienda develop an office dealing with Puerto Rico’s largest and most sophisticated taxpayers, which are often multinational corporations  With Puerto Rico focused on hurricane recovery efforts, Treasury and the Puerto Rico government are reassessing the types of assistance that Treasury might provide in the future, according to Treasury officials  Current and former Puerto Rico government officials and experts on Puerto Rico’s economy also told us that the federal government could further help Puerto Rico address its persistent deficits through federal policy changes that are fiscal in nature  For example, it could change select federal program funding rules—at a cost to the federal government—such as eliminating the cap on Medicaid funding and calculating the federal matching rate similar to how the rate is calculated in the states  Likewise, the Congressional Task Force on Economic Growth in Puerto Rico (Congressional Task Force), as established by PROMESA, issued a report in December 2016 that recommended changes to federal laws and programs that would spur sustainable long- term economic growth in Puerto Rico, among other recommendations  In addition to federal actions that could address the factors that contributed to Puerto Rico’s fiscal condition and debt levels, the Puerto Rico government plans to take various actions  For example, according to current Puerto Rico officials and the Puerto Rico government’s April 2018 fiscal plan, the government is: Planning to implement an integrated new information technology system for financial management, to include modernized revenue management and accounting and payroll systems  Hacienda officials stated that they are in the process of developing a project schedule for this long-term effort  Developing a new public healthcare model in which Puerto Rico’s government pays for basic services and patients pay for premium services  The government will begin implementing the new healthcare model in fiscal year 2019 and expects to achieve annual savings of $841 million by fiscal year 2023  Collaborating with the private sector for future infrastructure and service projects, including for reconstruction efforts related to Hurricanes Irma and Maria, which it expects will stimulate Puerto Rico’s weakened economy  We also asked Puerto Rico officials about progress made toward addressing many of the factors we identified  However, they did not provide us this information  We provided a draft of this report for review to Treasury, SEC, the Federal Reserve Bank of New York, the Government of Puerto Rico, and the Oversight Board  Treasury and SEC provided technical comments, which we incorporated as appropriate  The Federal Reserve Bank of New York and the Oversight Board had no comments  We received written comments from the Government of Puerto Rico, which are reprinted in appendix II  In its comments, the Government of Puerto Rico generally agreed with the factors we identified that contributed to Puerto Rico’s financial condition and levels of debt  It also provided additional context on Puerto Rico’s accumulation of debt, such as Puerto Rico’s territorial status and its effect on federal programs in Puerto Rico and outmigration  The Government of Puerto Rico also noted that the federal actions we identified to address factors contributing to Puerto Rico’s unsustainable debt levels did not include potential actions that were fiscal in nature or that addressed Puerto Rico’s long-term economic viability  As we note in the report, we excluded fiscal actions from our scope, consistent with the provision in PROMESA that was the statutory requirement for this work  We excluded potential actions that could promote economic growth in Puerto Rico because these actions would address debt levels in Puerto Rico only indirectly and because the Congressional Task Force on Economic Growth in Puerto Rico already recommended actions for fostering economic growth in Puerto Rico in its December 2016 report  We are sending copies of the report to the appropriate congressional committees, the Government of Puerto Rico, the Secretary of the Treasury, the Chairman of the Securities and Exchange Commission, and other interested parties  In addition, this report is available at no charge on the GAO website at http://gao gov  If you or your staff have any questions about this report, please contact me at (202) 512-6806 or krauseh@gao gov  Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report  GAO staff who made key contributions to this report are listed in appendix III  Our objectives were to describe (1) the factors that contributed to Puerto Rico’s financial condition and levels of debt; and (2) federal actions that could address the factors that contributed to Puerto Rico’s financial condition and levels of debt  Consistent with the provision in the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) that was the statutory requirement for this work, we focused on actions that would not increase the federal deficit  For both objectives we interviewed current Puerto Rico officials from several agencies—the Puerto Rico Department of Treasury (Hacienda in Spanish), Government Development Bank for Puerto Rico (GDB), the Puerto Rico Office of Management and Budget (Spanish acronym OGP), Fiscal Agency and Financial Advisory Authority (FAFAA), and the Puerto Rico Electric Power Authority  We also interviewed 13 former Puerto Rico officials that held leadership positions at Hacienda, GDB, or OGP, or a combination thereof  These former officials served between 1997 and 2016 for various gubernatorial administrations associated with the two political parties in Puerto Rico that held the governorship during that period  We also interviewed officials from the U S  Department of the Treasury (Treasury), the Securities and Exchange Commission (SEC), the Federal Reserve Bank of New York, and the Financial Oversight and Management Board for Puerto Rico (created by PROMESA)  Additionally, we conducted another 13 interviews with experts on Puerto Rico’s economy, the municipal securities markets, state and territorial budgeting and debt management—including credit rating agencies—and with select industry groups in Puerto Rico  We selected the experts we interviewed based on their professional knowledge closely aligning with our engagement objectives, as demonstrated through published articles, congressional testimonies, and referrals from agency officials or other experts  To describe the factors that contributed to Puerto Rico’s financial condition and levels of debt, we reviewed our prior work related to Puerto Rico’s financial condition and levels of public debt  We also collected and analyzed additional financial data from Puerto Rico’s audited financial statements for the fiscal years 2002 to 2014, the last year for which audited financial statements were available  To determine how the Puerto Rico government used bond proceeds, we reviewed a nongeneralizable sample of Puerto Rico bonds prospectuses issued between 2000 and 2017 from the Electronic Municipal Market Access database of the Municipal Securities Rulemaking Board  We reviewed literature—including academic reports, congressional hearing transcripts, and credit rating agency reports—that described Puerto Rico’s economy and factors that contributed to Puerto Rico’s levels of debt  We also reviewed credit rating agency reports that described Puerto Rico’s municipal debt and the agencies’ methodologies for rating municipal debt  We also collected and reviewed Puerto Rico government documents related to budget formulation and execution, debt issuance, and financial management  We considered factors to include, but not be limited to, macroeconomic trends, federal policies, and actions taken by Puerto Rico government officials  Our review focused largely, though not exclusively, on conditions that contributed to the debt crisis during those years for which we collected financial data on Puerto Rico, fiscal years 2002 to 2014  Finally, we also conducted a thematic analysis of the summaries of our interviews to identify common patterns and ideas  Although these results are not generalizable to all current and former officials and experts with this subject-matter expertise, and do not necessarily represent the views of all the individuals we interviewed, the thematic analysis provided greater insight and considerations for the factors we identified  To describe federal actions that could address the factors that contributed to Puerto Rico’s financial condition and levels of debt, we reviewed our prior reports and documents from Treasury and SEC, conducted a literature review, and conducted various interviews  Specifically, we met with federal agencies with subject-matter expertise or whose scope of responsibilities related to these actions, as well as with current and former Puerto Rico officials and municipal securities experts  Consistent with PROMESA, we omitted from our scope: (1) actions that could increase the federal deficit (i e , fiscal options), (2) actions that could be taken by the Puerto Rico government, (3) actions that could infringe upon Puerto Rico’s sovereignty and constitutional parameters, and (4) actions that would imperil America’s homeland and national security  We considered actions that could promote economic growth in Puerto Rico as outside of scope, as they could address debt levels in Puerto Rico indirectly, rather than directly, and because a study issued by the Congressional Task Force on Economic Growth in Puerto Rico already identified actions that Congress and executive agencies could take to foster economic growth in Puerto Rico  We also considered actions that could address Puerto Rico’s unfunded pension liability as outside of our scope  The actions we identified may also help avert future unsustainable debt levels in other territories; however, we did not assess whether and how each action would apply to other territories  We conducted this performance audit from January 2017 to May 2018 in accordance with generally accepted government auditing standards  Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives  We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives  In addition to the contact named above, Jeff Arkin (Assistant Director), Amy Radovich (Analyst in Charge), Pedro Almoguera, Karen Cassidy, Daniel Mahoney, A J  Stephens, and Justin Snover made significant contributions to this report 

ground_truth: There are five major sources of airport capital development funding: the federal Airport Improvement Program (AIP); local passenger facility charges (PFCs) imposed pursuant to federal law; tax-exempt bonds; state and local grants; and airport operating revenue from tenant lease and other revenue-generating activities such as landing fees. Federal involvement is most consequential in AIP, PFCs, and tax-exempt financing. The 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 AIP are drawn from the airport and airway trust fund, which is supported by a variety of user fees and fuel taxes. Different airports use different combinations of these sources depending on the individual airport's financial situation and the type of project being considered. 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. This is particularly the case for noncommercial airports, which received over 25% of AIP grants distributed in FY2018. Larger airports are much more likely to issue tax-exempt bonds or finance capital projects with the proceeds of PFCs. The FAA Reauthorization Act of 2018 (P.L. 115-254) provided annual AIP funding of $3.35 billion from the airport and airway trust fund for five years from FY2019 to FY2023. The act left the basic structure of AIP unchanged, but authorized supplemental annual funding of over $1 billion from the general fund to the AIP discretionary funds, starting with $1.02 billion in FY2019, and required at least 50% of the additional discretionary funds to be available to nonhub and small hub airports. The act included a provision permitting eligible projects at small airports (including those in the State Block Grant Program) to receive a 95% federal share of project costs (otherwise capped at 90%), if such projects are determined to be successive phases of a multiphase construction project that received a grant in FY2011. The 2018 reauthorization expanded the number of states that could participate in the State Block Grant Program from 10 to 20 and also expanded the existing airport privatization pilot program (now renamed the Airport Investment Partnership Program) to include more than 10 airports. The law included a provision that forbids states or local governments from levying or collecting taxes on a business at an airport that "is not generally imposed on sales or services by that State, political subdivision, or authority unless wholly utilized for airport or aeronautical purposes." The airport improvement issues Congress generally faces in the context of FAA reauthorization include the following: Should airport development funding be increased or decreased? Should the $4.50 ceiling on PFCs be eliminated, raised, or kept as it is? Could AIP be restructured to address congestion at the busiest U.S. airports, or should a large share of AIP resources continue to go to noncommercial airports that lack other sources of funding? Should Congress set tighter limits on the purposes for which AIP and PFC funds may be spent? This report provides an overview of airport improvement financing, with emphasis on AIP and the related passenger facility charges. It also discusses some ongoing airport issues that are likely to be included in a future FAA reauthorization debate.