You are given two reports by the government agency.  

Report 1:
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., 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:
DOD’s MILCON appropriations are used to fund the acquisition, construction, installation, and equipping of temporary or permanent public works, military installations, facilities, and real property needed to support U.S. military forces in the United States and overseas. As with other DOD activities, no funds may be appropriated in any fiscal year or obligated or expended for MILCON activities unless such funds have been specifically authorized by law. Each year, the National Defense Authorization Act authorizes amounts to be appropriated in each of the 18 programmatic MILCON appropriations accounts. Individual or conference committee reports accompanying each fiscal year’s National Defense Authorization Act provide specific congressional direction on authorized funding levels designated for specific construction projects supported by the various MILCON accounts. Similarly, conference committee reports or explanatory statements accompanying each fiscal year’s appropriations acts establish appropriated funding levels for MILCON projects. The process through which the active component requests funding for construction projects is supported by DOD’s Form 1391 Military Construction Project Data (Form 1391). The Form 1391 is to be used to support each project proposed for inclusion in the MILCON appropriations request submitted concurrently with all other DOD appropriations requests annually. The forms are to be used for both new projects as well as urgent unforeseen projects. The Form 1391 describes the scope, total project costs, and estimates of specific project elements. Costs associated with other project elements such as contingency and supervision, inspection, and design are also to be captured and included in the total requested amount. Finally, the Form 1391 is to include a description of the proposed construction and a requirements statement indicating what requirement the project provides. Project budget estimates are initially developed at the installation level and are provided to the next responsible level for review, validation, refinement, prioritization, and approval. Administrative support is to be provided when requested across the departments, but ultimately the installation is the originator and the primary responsible entity in developing the completed Form 1391. MILCON appropriations are generally available for obligation for 5 fiscal years, at which time the appropriation expires. For 5 years after they expire, appropriations are available for limited purposes, such as liquidating obligations made during the period of availability or adjusting contract costs. After these 5 years, any remaining unexpended amounts, whether obligated or unobligated, are canceled and returned to the U.S. Treasury. Once funds are returned to the U.S. Treasury, they are no longer available for any purposes. DOD obligates its appropriations throughout the period in which the appropriation is available. An “unobligated balance” is the difference between the total appropriation amount and total obligations made against the appropriated amounts. An “unexpended balance” is the total of obligated but unliquidated and unobligated amounts. According to DOD officials, available but unobligated amounts no longer needed may be either rescinded by Congress or reprogrammed to other MILCON projects that the active component identifies as needing additional funding. Reprogrammed amounts may be used to fund other projects where there are shortfalls; for projects authorized by Congress but not specifically funded through the appropriations process; for emergency projects, such as for facilities destroyed by fires. DOD’s flexibility to reprogram without congressional approval is limited by the amount to be reprogrammed to a particular project. DOD’s Financial Management Regulation requires prior congressional approval for a reprogramming that would result in an increase exceeding 25 percent of a project’s authorized base amount or $2 million, whichever is less. Prior approval is not required when established costs or project-related thresholds are not reached. According to DOD officials, reprogrammings requiring congressional approval are called “above-threshold reprogrammings” and those that do not are called “below-threshold reprogrammings.” DOD designates construction agents for the military departments and defense agencies with primary responsibility for developing and refining MILCON proposals and cost estimates, and to manage the design and construction of projects. Typically, the Army Corps of Engineers is the construction agent for Army MILCON-funded projects and the Naval Facilities Engineering Command is the construction agent for Navy and Marine Corps MILCON-funded projects. Either of those DOD entities can be the construction agent for the defense agencies and activities, such as for the Missile Defense Agency or Defense Education Activity, with the approval of the military department having jurisdiction of the real property facility. However, both the Army and the Navy may use each other’s construction agent if it is in the interest of efficiency and cost- effectiveness or when otherwise considered appropriate. The Air Force may use either the Army Corps of Engineers or Naval Facilities Engineering Command for its projects. Additionally, the Air Force Civil Engineer Center, although not a designated construction agent, reviews and approves requirements for Air Force MILCON cost estimates, and in some cases may design and construct Air Force projects where both the Air Force and the commander of the assigned construction agent agree that it is the most efficient, expeditious, and cost-effective means to complete the project. Within DOD there are two levels of military construction guidance: the Unified Facilities Criteria and component-level guidance. The Unified Facilities Criteria are overarching, DOD-wide technical manuals and standards used for planning, design, construction, restoration, and maintenance of DOD facility projects. The Unified Facilities Criteria was designed to standardize and streamline the process for developing, maintaining, and disseminating criteria in support of MILCON. The Unified Facilities Criteria contains guidance describing methods, procedures, and formats for the preparation of construction cost estimates and construction contract modification estimates, among other types of guidance. The Unified Facilities Criteria is to be used to the greatest extent possible by all the DOD regardless of funding source. In addition to the Unified Facilities Criteria, the military departments and agencies have also developed their own internal guidance on MILCON, providing further direction on conducting activities such as cost analysis and determining facility requirements. We developed the GAO Cost Estimating and Assessment Guide: Best Practices for Developing and Managing Capital Program Costs (Cost Guide) to assist federal agencies in developing reliable cost estimates and also as a tool for evaluating existing cost estimating procedures. To develop the Cost Guide, our cost experts assessed measures applied by cost estimating organizations throughout the federal government and industry and considered best practices for the development of reliable cost estimates. While the Cost Guide has a focus on developing cost estimates in the context of government acquisition programs, it outlines best practices that are generally applicable to cost estimation in a variety of circumstances. These best practices can be used to assess (1) the specific project cost estimates an agency develops to determine whether they meet the four characteristics—comprehensive, well-documented, accurate, and credible—for being reliable and (2) an agency’s cost estimating guidance and procedures to see how well they incorporate all the steps needed for producing a high-quality cost estimate. Figure 1 shows the four characteristics and associated best practices for each that define a reliable cost estimate and table 1 shows the 12 steps identified in the Cost Guide that, if followed correctly, should result in high-quality cost estimates that management can use for making informed decisions. During fiscal years 2005 through 2016, Congress appropriated about $66 billion in MILCON funds to the active component and, as of September 30, 2016, the active component had obligated all but about $5.1 billion and expended all but about $11 billion of those funds. Of the $5.1 billion that remains unobligated, about $4.6 billion was unexpired and available for new obligations (i.e., from fiscal year 2013 through 2016 appropriations). Table 2 shows the active component’s combined MILCON appropriations, obligations, and unexpended funds from fiscal year 2005 through fiscal year 2016. In general, during the early first few years of a MILCON appropriation available for 5 years, it is often likely that most of the funds will remain unobligated. For example, as shown in table 2 above, of the nearly $3.9 billion appropriated for military construction for the active component from the fiscal year 2016-2020 appropriation, only about $1.1 billion had been obligated as of September 30, 2016. This is not surprising given the time that it takes to award, obligate and disburse funds for projects. Ultimately, though, as an appropriation nears its expiration date, all or nearly all of the amounts have generally been obligated. In fact, as shown in table 2, for each MILCON appropriation received by the active component prior to fiscal year 2013 (fiscal years 2005 through 2012), less than 2 percent of each year’s appropriation was unexpended as of September 30, 2016. In appendix II, we provide additional analysis of the active component’s unexpended and unobligated balances, by appropriation year and by military department. Although ultimately, the active component obligates and expends most of its MILCON appropriations, the active component can experience a wide range of differences between initial cost estimates and final costs during the execution of individual MILCON projects, resulting in savings or shortfalls depending on the project. For example, we found that from fiscal year 2010 through fiscal year 2016, the active component achieved about $4.2 billion in MILCON project savings as a result, for example, of canceled projects, projects with lower than expected contractor bids, or the use of less expensive building materials. In appendix III, we provide additional analysis of the active component’s estimated initial costs and the contract award amounts that were funded by MILCON appropriations for fiscal year 2010 through fiscal year 2016. The active component reprogrammed about $1.6 billion in MILCON appropriations to fund shortfalls caused by emergency projects, projects that were authorized but did not receive specific appropriations, and projects needing additional funding in fiscal years 2010 through 2016. Of this amount, the Army reprogrammed about $789 million of about $14 billion in appropriated MILCON funds; the Navy, about $535 million of about $14 billion in appropriated MILCON funds; and the Air Force, about $295 million of about $7 billion in appropriated MILCON funds. Table 3 shows the number and amounts of above-threshold reprogrammings by the active component for fiscal years 2010 through 2016. As seen in table 3, for any given year there are typically hundreds of millions of dollars reprogrammed. There are generally multiple active or canceled projects that result in cost savings, which may be used to fund authorized but not specifically funded projects. Below are three examples where the active component funded MILCON projects with amounts reprogrammed from other projects: Repair Shop at Andersen Air Force Base, Guam: This is an Air Force project to construct a pacific air resiliency low observable/corrosion control/composite repair shop in Guam. It is an authorized project that did not receive specific funding during the appropriation process but was fully funded by reprogrammed cost savings from active construction projects. Congress authorized $34.4 million for the repair shop in fiscal year 2015; however, no funds were specifically appropriated for the project. According to Air Force officials, since this was their top unfunded military construction priority, they used $34.4 million in savings achieved from other projects to construct the repair shop. Table 4 lists the three projects whose MILCON funds were reprogrammed for the repair shop at Andersen Air Force Base in Guam. Training Facility at the Naval Air Station at Mayport, Florida: This is a Navy project to construct a littoral combat ship training facility in Florida. It is a specifically funded project requiring additional funds that received reprogrammed amounts from a canceled project. In fiscal year 2014, the initial cost as listed on the Form 1391 was estimated to be $20.5 million, but project costs increased by 41 percent to an estimated $28.9 million, according to a fiscal year 2016 reprogramming request to Congress. As detailed in the reprogramming request, the Navy attributed the increased cost to underestimated mission simulator and communication line requirements. To fund the increased costs, the Navy used $8.3 million in savings from a canceled project to complete the facility. Table 5 lists the canceled project that resulted in funds being reprogrammed for the training facility at Mayport. Barracks at Presidio of Monterey, California: This is an Army project to construct a trainee barracks in California. It is a specifically funded project in need of additional funds that received reprogrammed amounts from active and canceled construction projects. In fiscal year 2011, the initial cost for the project as listed on the Form 1391 was estimated to be $63 million, but project costs increased by 51 percent to $95 million, according to a fiscal year 2015 reprogramming request to Congress. As detailed in the reprogramming request, the Army attributed the increased costs to a 3-year delay in construction and the need to move the project to a small, steep-terrain site. The reprogramming request further noted that the delay in construction was due to the discovery at the proposed construction site of a seismic fault and a plant that is an endangered species. To fund the increased costs, the Army sought to reprogram funds from the savings achieved from the active and canceled projects. Table 6 lists the projects that generated the reprogrammed funds used for the barracks at Presidio. Our analyses of the cost estimates for three selected projects shows that the cost estimates were not reliable, and DOD’s cost estimating guidance does not fully incorporate all the steps needed for producing reliable estimates. We examined the cost estimates of three high-value military construction projects and noted that the initial cost estimates increased for all three projects, with cost estimates for two of the projects increasing by over 30 percent and the other, by about 7 percent. Specifically: Strategic Command Operations Building, Offutt Air Force Base, Nebraska. The project to construct a nuclear, space, and network command and control operations building for the command at Offutt Air Force Base, Nebraska, increased from an initial cost estimate in fiscal year 2012 of $564 million to $601 million in fiscal year 2014 (or a 7-percent increase). According to a fiscal year 2014 reprogramming request to Congress, the Air Force attributed the increased cost to the fact that the project team did not appreciate the full scope, complexity, and risk of such an information technology- intensive project. These cost issues are similar to challenges we have reported on for other information technology-intensive MILCON projects. The Air Force is the project owner and the Army Corps of Engineers is the construction agent for this project. Command Headquarters and Cyberspace Operations Building, Fort Meade, Maryland. The project to construct a command headquarters and cyberspace operations building with sensitive compartmented information facility in Fort Meade, Maryland, increased from an initial cost estimate in fiscal year 2013 of $84 million to $110 million in fiscal year 2015 (or a 31-percent increase). As detailed in the fiscal year 2015 reprogramming request, the Navy attributed the increased cost to higher than expected construction costs due to increased demand on the labor workforce in the Washington, D.C./Baltimore area and underestimated electrical power requirements. The Navy is the project owner and the Army Corps of Engineers is the construction agent for this project. Elementary School Camp Foster, Japan. The project to replace an elementary school at Camp Foster, Japan increased from an initial cost estimate in fiscal year 2012 of $79 million to $107 million in fiscal year 2014 (or a 35-percent increase). As detailed on the fiscal year 2014 reprogramming request, the Department of Defense Education Activity attributed the increased cost to the volatile construction climate in Japan caused by natural disasters; Japanese government policies, economic stimulus, and reform; and the planned developments for the 2020 Tokyo Olympic Games. Although this project is not owned by any of the military departments, it is being managed by the Army Corps of Engineers in its role as a DOD construction agent through which it plays an important role in the development of the construction cost estimate. The Department of Defense Education Activity is the project owner and the Army Corps of Engineers is the construction agent. To determine the reliability of the cost estimates for these three selected projects, we assessed the cost estimates against the best practices for developing a reliable estimate in our Cost Guide. As previously discussed, the Cost Guide defines the four characteristics— comprehensive, well documented, accurate, and credible—of a reliable cost estimate and the associated best practices related to each characteristic. In conducting these assessments, we examined both the Form 1391 estimate (i.e., the estimate used to develop the budget) and the independent government estimate i.e., (the estimate used to award the contract) for each project. Our analysis of the cost estimates for the three selected projects shows that the cost estimators did not follow all the best practices listed for each of the four characteristics. As a result, none of the characteristics were fully or substantially met. To be reliable, a cost estimate must substantially or fully meet each of the four characteristics. As the Cost Guide states, if any of the characteristics are not met, minimally met, or partially met, then the cost estimate does not fully reflect the characteristics of a high-quality estimate and cannot be considered reliable. Table 7 provides the results of our assessment of the cost estimates for each of the three selected projects. The Cost Guide also identifies 12 steps that, when incorporated into an agency’s cost estimating procedures and guidance, are more likely to result in reliable and valid cost estimates. However, our analysis of DOD’s department-wide cost estimating guidance—the Unified Facilities Criteria—found that the criteria did not include all of these 12 steps. The Unified Facilities Criteria incorporates some of the 12 steps to some degree, but not others, and as a result DOD is at a greater risk of developing estimates that are not reliable. Table 8 provides our assessment of the extent to which DOD’s Unified Facilities Criteria incorporates the 12 steps needed to develop a high-quality, reliable cost estimate. Each of the military departments is required to follow the Unified Facilities Criteria to the greatest extent possible when designing and constructing facilities. However, as shown by the table above, there are shortcomings in these criteria when compared with our Cost Guide. Despite these shortcomings, the military departments have gone beyond the Unified Facilities Criteria and developed their own guidance that more closely aligns with our Cost Guide. For example, for both the “determining the estimating structure” and “obtain the data” steps, we found that all three military departments had developed their own guidance that more closely aligned with the 12 steps than the Unified Criteria did. In addition, some military departments are also making improvements to their cost estimating processes, but these improvements have not been fully implemented yet. For example, the Air Force Civil Engineer Center is implementing a cost estimate improvement plan to include the training of nearly 700 airmen and has conducted a study that directly ties the 12 steps in the Cost Guide to the associated tasks to be completed by the Air Force cost estimator to meet each individual step. However, the actions contained in the cost improvement plan have not been fully implemented and still remain in the concept phase. Similarly, although the Army Corps of Engineers is investigating expanding the use the of cost and schedule risk analysis—which could align with the best practices in the Cost Guide—that the Army currently conducts for selected civil work construction projects to its high-cost military construction projects, the Army has not formally required the use of these tools. In appendix IV, we describe the guidance the military departments have developed beyond the Unified Facilities Criteria. The Cost Guide is designed to establish a consistent methodology that is based on best practices and that can be used across the federal government for developing, managing, and evaluating capital program cost estimates. Air Force and Army Corps of Engineers officials noted that there may be instances in which following all the 12 steps of the Cost Guide for every MILCON project would not be appropriate to the risk level of the project. For example, it may not be realistic or to the military departments’ benefit for the military departments to conduct a sensitivity and uncertainty analysis or develop an independent cost estimate for all the construction projects they initiate every year, especially for low-cost projects. We agree that it may not be suitable to fully apply all 12 of the cost estimating steps in the Cost Guide to all MILCON projects. However, incorporating the 12 steps into the Unified Facilities Criteria would establish consistency across DOD in the cost estimating process by ensuring that, for each MILCON project, each step in the Cost Guide would at least be considered. Furthermore, DOD could choose to establish thresholds—based on, for example, the dollar values of the projects—to guide the services in implementing the 12 steps for the most valuable projects. Skipping or not considering any step of the 12-step cost estimating process, especially for high-value projects such as those in our case studies, increases the risk that cost estimates may use improper assumptions, lack appropriate definition, or be otherwise unreliable. Without improving the Unified Facilities Criteria with respect to cost estimating processes, DOD and the services will not be positioned well to provide reliable cost estimates to DOD and congressional decision- makers. Each year DOD receives billions of dollars in MILCON appropriations to use for projects in the United States and overseas. The quality of project cost estimates are of great importance since those estimates are the basis for DOD’s requests for appropriations. While DOD’s policy is that MILCON cost estimates be prepared as accurately as possible in order to reflect the full cost of constructing DOD facilities, DOD’s Unified Facilities Criteria—the department’s primary construction criteria for developing cost estimates—does not fully incorporate all of the steps needed for producing reliable cost estimates. Until DOD incorporates the 12 steps of high-quality, reliable cost estimating into this department-wide construction criteria, DOD and congressional decision-makers may not have reliable estimates to inform their decisions regarding appropriations and the oversight of projects. We are making one recommendation to DOD: The Secretary of Defense should ensure that the Assistant Secretary of Defense for Energy, Installations, and the Environment work with DOD’s construction agents, military departments, and other offices to improve DOD’s MILCON cost estimating guidance (i.e., DOD’s Unified Facilities Criteria) by fully incorporating all the steps needed for developing high- quality reliable cost estimates. (Recommendation 1) We provided a draft of this report to DOD. In written comments, which are reprinted in their entirety in appendix VI, DOD partially concurred with our recommendation. DOD also provided technical comments that have been incorporated into the report as appropriate. DOD partially concurred with our recommendation to improve its cost estimating guidance by fully incorporating all 12 steps needed for developing high-quality, reliable estimates. DOD stated that it did not believe that it is suitable to fully apply all 12 steps to any construction project due to characteristics of the military construction program that DOD believes differ from those of major system or weapon acquisition programs. However, DOD also stated that it concurred with the intent and general applicability of the twelve steps to military construction and that DOD cost estimating guidance lacks specificity in several of these areas. DOD acknowledged that expanding its cost guidance to more fully incorporate these steps would benefit the military construction program, and that it is planning to address this by revising its cost guidance during Fiscal Year 2019. In our report, we recognize that it may not be appropriate to fully apply all 12 steps to each construction project. For example, it may not be realistic or to the military departments’ benefit to conduct a sensitivity and uncertainty analysis or develop an independent cost estimate for all the construction projects they initiate every year, especially for low-cost projects. Accordingly, we did not recommend that DOD fully apply all 12 steps to each construction project, but rather that it fully incorporate the 12 steps into the Unified Facilities Criteria so that, at least, each step is considered for each project. DOD could then choose to establish thresholds—based on, for example, the dollar values of the projects—to determine for which the 12 steps should be fully applied or other circumstances in which some steps might not be applicable. We believe DOD’s planned revisions will meet the general intent of our recommendation. We are sending copies of this report to the appropriate congressional committees; the Secretary of Defense, the Secretaries of the Army, Navy, and Air Force. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff has any questions about this report, please contact me at (202) 512-4523 or leporeb@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 VI. To examine the active component’s military construction (MILCON) obligations and expended balances, we reviewed MILCON appropriations found in appropriations acts, including accompanying explanatory statements and conference committee reports from fiscal year 2005 through 2016. Further, we analyzed the obligation and disbursement data of the active component‘s MILCON accounts, appropriation status reports, bid savings reports, as well as annual reports from the U.S. Department of the Treasury. We also collected and compared project data from each of the active component on projects that had been initiated and completed during fiscal year 2010 through fiscal year 2016. Specifically, we compared the initial estimate as shown on the Form 1391—the form DOD uses to submit requirements and justifications in support of its funding requests to Congress—with the contract award amount and analyzed any differences between the two. To examine the amount of MILCON reprogramming during fiscal years 2010 and 2016 by the active component, we reviewed DOD’s requests to Congress to reprogram MILCON funds from one project to another. We calculated the total number of times such requests were made and the dollar amounts for fiscal year 2010 through fiscal year 2016. We selected this time frame because the reprogramming requests were readily available from DOD. In addition, we judgmentally selected three projects from this same time frame and reviewed accompanying Forms 1391 and the reprogramming requests associated with the projects to illustrate instances in which savings from one MILCON project funded another project. We collected and analyzed data for fiscal years 2005 through 2016 on the active component MILCON appropriations, obligations, and disbursements and we collected reprogramming data for fiscal years 2010 through 2016. We assessed the reliability of the data by interviewing knowledgeable officials about the data and the steps that they had taken to verify the data’s accuracy. We determined that the data were sufficiently reliable for our objectives. To determine the extent to which DOD’s MILCON cost estimates are reliable and DOD’s guidance for producing estimates fully incorporates all of the steps needed for developing reliable estimates, we compared the process for developing three selected projects with the characteristics and best practices for developing a reliable estimate identified in GAO’s Cost Estimating and Assessment Guide: Best Practices for Developing and Managing Capital Program Costs (the Cost Guide). This guide is a compilation of cost estimating best practices drawn from across industry and federal government. We selected our projects from the universe of projects that we reasonably expected could have begun execution (i.e., projects initiated during fiscal years 2012-2014); projects that were underway, but not substantially completed (i.e., between 10- and 75- percent complete); and projects that constituted a significant financial investment (i.e., projects with appropriations of $75 million or greater). Ultimately, of 690 total projects we identified DOD-wide, 13 met these criteria and, from this sample, we selected the 3 projects included in this report: (1) the construction of a replacement elementary school at Camp Foster, Japan; (2) the construction of a Strategic Command operations building at Offutt Air Force Base, Nebraska; and (3) the construction of a Marine Corps command headquarters and cyberspace operations building in Fort Meade, Maryland. In conducting the assessments for these three selected projects, we examined the processes used to develop both the Form 1391 estimate (i.e the form DOD uses to submit project-level requirements and justifications in support of its MILCON funding requests to Congress ) and the independent government estimate (i.e., the estimate used to award the contract) to determine whether the project cost estimates had the characteristics of a high-quality and reliable cost estimate, as defined in the Cost Guide. These projects are not intended to be a projectable sample, but to illustrate how cost estimates are assessed against best practices. Although the Camp Foster project is not owned by any of the active component, the construction and planning of the project is being led by the Army Corps of Engineers in its capacity as a DOD construction agent and, as such, we decided to include it in our review. Additionally, we reviewed DOD’s Unified Facilities Criteria and the active component’s respective guidance related to MILCON cost estimating and compared them with the steps needed for developing reliable estimates identified in the Cost Guide. We also interviewed military project cost estimators and active component construction agents to discuss the requirements and guidance they follow in preparing, documenting, and reviewing project cost estimates. Table 9 details the documents we reviewed for our cost estimating assessments. We conducted this performance audit from January 2016 to March 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 this appendix we provide the supporting details on the active component’s unobligated and unexpended balances of military construction (MILCON) appropriations for fiscal years 2005 through 2016. We include details on unobligated and unexpended balances by appropriation year and include individual tables for each military department of the active component. Overall, the active component had high obligation and expenditure rates associated with MILCON appropriations that have expired or been canceled. The Army, the Air Force, and the Navy consistently expended over 90 percent of amounts appropriated in fiscal years 2005 through 2011. This appendix also provides supporting details on the active component’s execution of MILCON appropriations for fiscal years 2010 through 2016. Using Department of Defense (DOD) data, we identified two groups of MILCON projects: congressionally directed and other. “Congressionally directed” projects are those MILCON projects specifically identified in an appropriation act, explanatory statement, and/or committee reports accompanying the appropriation act for a specific fiscal year. “Other” projects refer to congressionally directed MILCON projects identified in an appropriation act, explanatory statement, and/or conference committee reports in a previous fiscal year. Overall, the active component obligated about 89 percent of its fiscal years 2010 through 2012 appropriations for congressionally directed projects whose appropriations expired on September 30, 2017. Tables 10 through 12 present detailed information on unexpended and unobligated balances for each military department of the active component’s MILCON appropriation for fiscal years 2005 through 2016, as reported by DOD as of September 30, 2016. Table 10 shows that for fiscal years 2005 through 2012, the Army expended almost all of its MILCON appropriations. Specifically, with the exception of fiscal year 2012, the Army expended at least 90 percent of its appropriations received each fiscal year for 2005 through 2011. Unexpended rates for amounts appropriated for fiscal years 2014 through 2016 vary and unobligated amounts for these years remain available for new obligations. Table 11 shows that, for fiscal years 2005 through 2013, the Air Force expended almost all of its MILCON appropriations. Specifically, the Air Force expended at least 95 percent of its appropriations received each year for fiscal years 2005 through 2011 and also in fiscal year 2013. Unexpended rates for amounts appropriated for fiscal years 2014 through 2016 vary and unobligated amounts for these years remain available for new obligations. Table 12 shows that for fiscal years 2005 through 2012, the Navy expended almost all of its MILCON appropriations. Specifically, the Navy expended at least 90 percent of its appropriations received each fiscal year for 2005 through 2011. Unexpended rates for amounts appropriated for fiscal years 2014 through 2016 vary and unobligated amounts for these years remain available for new obligations. Tables 13 through 15 provide detailed information on budget execution for each active duty military department’s MILCON appropriation for “congressionally directed” and “other” MILCON projects for fiscal years 2010 through 2016, as reported by DOD as of September 30, 2016. Table13 shows the obligations made by the Army for MILCON appropriations for fiscal years 2010 through 2016. We analyzed the obligations made during these appropriations’ period of availability for congressionally directed and other MILCON projects. For fiscal year 2010, using data in the table, we found that about 97.2 percent of obligations were for congressionally directed projects and 2.8 percent were for other projects, as discussed above. In fiscal year 2011, about 94 percent of obligations were for congressionally directed projects and 4.2 percent were for other projects; and in fiscal year 2012, about 86.5 percent of obligations were for congressionally directed projects and 7.2 percent were for other projects. Table 14 shows the obligations made by the Air Force for MILCON appropriations for fiscal years 2010 through 2016. We analyzed the obligations made during these appropriations’ period of availability for congressionally directed and other MILCON projects. For fiscal year 2010, using the data listed in the table, we found that 90.5 percent of obligations were for congressionally directed projects and 7.3 percent were for other projects, as discussed above. In fiscal year 2011, about 84.3 percent of obligations were for congressionally directed projects and 12.9 percent were for other projects; and in fiscal year 2012, about 87.5 percent of obligations were for congressionally directed projects and 9.0 percent were for other projects. Table 15 shows the obligations made by the Navy for MILCON appropriations for fiscal years 2010 through 2016. We analyzed the obligations made during these appropriations’ period of availability for congressionally directed and other MILCON projects. For fiscal year 2010, using data in the table, we found that 84.7 percent of obligations were for congressionally directed projects and 15.0 percent were for other projects, as discussed above. In fiscal year 2011, about 87.7 percent of obligations were for congressionally directed projects and 11.8 percent were for other projects; and in fiscal year 2012, about 85.5 percent of obligations were for congressionally directed projects and 13.4 percent for other projects. This appendix provides information on our analysis of DOD’s estimated initial costs and contract award amounts of projects that had been initiated and completed during fiscal year 2010 through fiscal year 2016 by the active component. An official from the Office of the Assistant Secretary of Defense for Energy, Installations, and Environment told us that, to determine whether initial cost estimates were over- or underestimated, a comparison between initial Form 1391 estimates and contract award amounts would be a valid approach since contract award amounts are, in general, estimates of the same requirements identified on a Form 1391. The official also noted that supervision, inspection, overhead, and contingency costs included on a Form 1391 are not included in contract award amounts, which could create differences between the Form 1391 cost estimates and contract award prices. Because of this, we excluded the supervision, inspection, overhead, and contingency costs from the Form 1391 estimates in the table below to eliminate those differences. Form 1391 cost estimates may also vary from contract award amounts for reasons such as changes in project size or scope, changes in project characteristics, unexpectedly high or low contractor bids, or differences in expected building material costs, among other things. A negative percent change from the Form 1391 estimate to the contract award amount indicates the estimated project cost was overestimated and a positive percent change indicates the project was underestimated. We did not determine the precise reasons for any differences between estimated costs and contract award amounts. Table 16 lists information on 414 completed projects funded with military construction (MILCON) appropriations during fiscal year 2010 through fiscal year 2016 sorted by largest percentage overestimated to largest percentage underestimated. The military departments of the active component have gone beyond the Unified Facilities Criteria and developed their own guidance for military construction (MILCON) that more closely aligns with the 12 steps needed for developing high-quality, reliable estimates. Table 17 describes the guidance developed by the military departments to align with those steps. In addition to the contact named above, Maria Storts, Assistant Director; Bonita Anderson; Shawn Arbogast; Ronald Bergman; Brian Bothwell; Robert Brown; Farrah Graham; Mae Jones; Jennifer Leotta; Amie Lesser; Felicia Lopez; Carol Petersen; Vikki Porter; Steve Pruitt; and Karen Richey made key contributions to this report.

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

Answer: 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.