[Federal Register Volume 71, Number 21 (Wednesday, February 1, 2006)]
[Proposed Rules]
[Pages 5188-5200]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-896]


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DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 158

[Docket No. FAA-2006-23730; Notice No. 06-01]
RIN 2120-AI68


Passenger Facility Charge Program, Debt Service, Air Carrier 
Bankruptcy, and Miscellaneous Changes

AGENCY: Federal Aviation Administration (FAA), DOT.

ACTION: Notice of proposed rulemaking (NPRM).

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SUMMARY: This action proposes to change the passenger facility charge 
program to add more eligible uses for revenue, protect such revenue in 
bankruptcy proceedings, and eliminate charges to passengers on military 
charters. These proposed actions respond to the Vision 100--Century of 
Aviation Reauthorization Act. In addition, the proposed action would 
revise current reporting requirements to reflect technological 
improvements; incorporate some existing practices and policies into 
current regulations; and clarify and update existing references and 
regulations. This proposal would further streamline the existing 
policies of the passenger facility charge program.

DATES: Send your comments on or before April 3, 2006.

ADDRESSES: You may send comments [identified by Docket Number FAA-2006-
23730] using any of the following methods:
    <bullet> DOT Docket Web site: Go to http://dms.dot.gov and follow 
the instructions for sending your comments electronically.
    <bullet> Government-wide rulemaking Web site: Go to http://www.regulations.gov and follow the instructions for sending your 
comments electronically.
    <bullet> Mail: Docket Management Facility; U.S. Department of 
Transportation, 400 Seventh Street, SW., Nassif Building, Room PL-401, 
Washington, DC 20590-0001.
    <bullet> Fax: 1-202-493-2251.
    <bullet> Hand Delivery: Room PL-401 on the plaza level of the 
Nassif Building, 400 Seventh Street, SW., Washington, DC, between 9 
a.m. and 5 p.m., Monday through Friday, except Federal holidays.
    For more information on the rulemaking process, see the 
SUPPLEMENTARY INFORMATION section of this document.
    Privacy: We will post all comments we receive, without change, to 
http://dms.dot.gov, including any personal information you provide. For 
more information, see the Privacy Act discussion in the SUPPLEMENTARY 
INFORMATION section of this document.
    Docket: To read background documents or comments received, go to 
http://dms.dot.gov at any time or to Room PL-401 on the plaza level of 
the Nassif Building, 400 Seventh Street, SW., Washington, DC, between 9 
a.m. and 5 p.m., Monday through Friday, except Federal holidays.

FOR FURTHER INFORMATION CONTACT: Sheryl Scarborough, Airports Financial 
Analysis & Passenger Facility Charge Branch, APP-510, Federal Aviation 
Administration, 800 Independence Avenue, SW., Washington, DC 20591; 
telephone: (202) 267-8825; facsimile: (202) 267-5302; e-mail: 
<a href="/cdn-cgi/l/email-protection#deadb6bbaca7b2f0adbdbfacbcb1acb1abb9b69eb8bfbff0b9b1a8"><span class="__cf_email__" data-cfemail="94e7fcf1e6edf8bae7f7f5e6f6fbe6fbe1f3fcd4f2f5f5baf3fbe2">[email protected]</span></a>; or Beth Weir, Airports Law Branch, AGC-610, 
Federal Aviation Administration, 800 Independence Avenue, SW., 
Washington, DC 20591, telephone (202) 267-5880; facsimile: (202) 267-
5769.

SUPPLEMENTARY INFORMATION:

Comments Invited

    The FAA invites interested persons to join in this rulemaking by 
filing written comments, data, or views. We also invite comments about 
the economic, environmental, energy, or federalism impacts that might 
result from adopting the proposals in this document. The most helpful 
comments reference a specific portion of the proposal, explain the 
reason for any recommended change, and include supporting data. We ask 
that you send us two copies of written comments.

[[Page 5189]]

    We will file in the docket all comments we receive, as well as a 
report summarizing each substantive public contact with FAA personnel 
about this proposed rulemaking. The docket is available for public 
inspection before and after the comment closing date. If you wish to 
review the docket in person, go to the address in the ADDRESSES section 
of this preamble between 9 a.m. and 5 p.m., Monday through Friday, 
except Federal holidays. You may also review the docket using the 
Internet at the Web address in the ADDRESSES section.
    Privacy Act: Using the search function of our docket Web site, 
anyone can find and read the comments received into any of our dockets. 
This includes the name of the individual sending the comment (or 
signing the comment for an association, business, labor union). You may 
review DOT's complete Privacy Act Statement in the Federal Register 
published on April 11, 2000 (65 FR 19477-78) or you may visit http://dms.dot.gov.
    Before acting on this proposal, we will consider all comments we 
receive on or before the closing date for comments. We will consider 
comments filed late if it is possible to do so without incurring 
expense or delay. We may change this proposal because of the comments 
we receive.
    If you want the FAA to acknowledge receipt of your comments on this 
proposal, include with your comments a preaddressed, stamped postcard 
on which the docket number appears. We will stamp the date on the 
postcard and mail it to you.

Proprietary or Confidential Business Information

    Do not file in the docket information that you consider to be 
proprietary or confidential business information. Send or deliver this 
information directly to the person identified in the FOR FURTHER 
INFORMATION CONTACT section of this document. You must mark the 
information that you consider proprietary or confidential. If you send 
the information on a disk or CD ROM, mark the outside of the disk or CD 
ROM and also identify electronically within the disk or CD ROM the 
specific information that is proprietary or confidential.
    Under 14 CFR 11.35(b), when we are aware of proprietary information 
filed with a comment, we do not place it in the docket. We hold it in a 
separate file to which the public does not have access, and place a 
note in the docket that we have received it. If we receive a request to 
examine or copy this information, we treat it as any other request 
under the Freedom of Information Act (5 U.S.C. 552). We process such a 
request under the DOT procedures found in 49 CFR part 7.

Availability of Rulemaking Documents

    You can get an electronic copy using the Internet by:
    (1) Searching the Department of Transportation's electronic Docket 
Management System (DMS) Web page (http://dms.dot.gov/search);
    (2) Visiting the FAA's Regulations and Policies Web page at http://www.faa.gov/regulations_policies; or
    (3) Accessing the Government Printing Office's Web page at http://www.access.gpo.gov/su_docs/aces/aces140.html.
    You can also get a copy by sending a request to the Federal 
Aviation Administration, Office of Rulemaking, ARM-1, 800 Independence 
Avenue, SW., Washington, DC 20591, or by calling (202) 267-9680. Make 
sure to identify the docket number, notice number, or amendment number 
of this rulemaking.

Authority for This Rulemaking

    The FAA's authority to issue rules regarding aviation safety is 
found in Title 49 of the United States Code. Subtitle I, section 106 
describes the authority of the FAA Administrator. Subtitle VII, 
Aviation Programs, describes in more detail the scope of the agency's 
authority.
    This rulemaking is promulgated under the authority described in 
subtitle VII, part A, subpart I, section 40117. Under that section, the 
FAA, by delegation, is charged with prescribing regulations to impose a 
passenger facility fee to finance an eligible airport-related project. 
This regulation is within the scope of that authority because Vision 
100 requires the FAA to change the PFC program. Many proposals in this 
document are taken from Vision 100.

Background

    On March 23, 2005, the FAA published a final rule (2005 final rule) 
to create a 3-year pilot program for non-hub airports to test new 
application and application approval procedures for the passenger 
facility charge (PFC) program (70 FR 14928). The final rule contains 
several changes designed to streamline the PFC application and 
amendment procedures for all PFC applications and amendments to improve 
the entire PFC program.
    The FAA published the 2005 final rule to address Congressional 
mandates in the Vision 100--Century of Aviation Reauthorization Act 
(Vision 100). The non-hub pilot program, with the PFC application 
streamlining procedures, however, was only one of six mandates 
specified in Vision 100. The FAA separated the non-hub program and 
related changes from the other mandates because Congress had required 
the FAA to publish proposed rules on the pilot program within 180 days 
of enactment of Vision 100.
    This rulemaking addresses the remaining mandates in Vision 100. 
These mandates include:
    (1) Making low-emission airport vehicles and ground support 
equipment eligible for PFC funding,
    (2) Using PFCs to pay debt service on projects that are ``not an 
eligible airport-related project'' when there is a financial need at an 
airport,
    (3) Clarifying the PFC status of military charters,
    (4) Structuring PFC account requirements for carriers in 
bankruptcy, and
    (5) Making eligible the use of PFC revenue as local share for 
projects under the air traffic modernization cost-sharing program.
    In addition, the FAA is proposing other changes, two of which would 
streamline benefits beyond those contained in the 2005 final rule. 
These proposed changes would:
    (1) Provide for the electronic filing of notices and reports;
    (2) Provide a process for periodic review and change of the carrier 
compensation level; and
    (3) Modify the content and due date for some public agency reports 
and notices.

Discussion of the Proposals

    The NPRM is divided into three parts:
    (1) Changes mandated by Vision 100;
    (2) Changes associated with technological improvements; and
    (3) Changes to streamline PFC procedures, codify PFC policies, or 
address issues or questions about the PFC program.

Changes Mandated by Vision 100

Low-Emission Airport Vehicles and Ground Support Equipment

    Section 121 of Vision 100 establishes a voluntary program to reduce 
airport ground emissions at commercial service airports in air quality 
nonattainment and maintenance areas (49 U.S.C. 40117(a)(3) and (b)(5)). 
This program makes the cost of new or converted equipment or vehicles 
eligible for PFC funding. The intent of the program is not to cause the 
premature retirement of existing equipment or vehicles, but to provide 
incentives to buy replacements

[[Page 5190]]

or to convert existing equipment to meet lower emissions standards. The 
program helps airports meet their obligations under the Clean Air Act 
(42 U.S.C. 7501(2)) and helps regional efforts to meet health-based 
National Ambient Air Quality Standards. The program goal is to reduce 
the amount of regulated pollutants and other harmful air emissions 
produced by ground transportation sources at airports. The program also 
supports efforts to increase U.S. energy independence by emphasizing 
domestically produced alternative fuels that are substantially 
nonpetroleum based. The program provides public agencies with financial 
and regulatory incentives to increase their investment in proven low-
emission technology. Use of alternative fuel vehicles and other low-
emission technologies that are particularly suited to the airport 
environment are highly encouraged.
    To address Vision 100, the proposed rule would add the definition 
of ``ground support equipment'' to Sec.  158.3. Ground support 
equipment includes vehicles used for operations and maintenance of 
aeronautical activities, but does not include vehicles used to meet 
safety, security, and snow removal requirements. Baggage tugs, belt 
loaders, cargo loaders, forklifts, fuel trucks, lavatory trucks, and 
pushback tractors are among the types of vehicles that fit the 
definition of ground support equipment. In addition, battery recharging 
and alternate fueling stations are eligible under this program.
    The low-emission vehicle program provides a funding mechanism to 
acquire low-emission technology, which often is more costly than 
conventional technology. The proposed rule would modify Sec.  158.13 by 
setting the maximum allowable cost for certain low-emission technology 
projects. For new vehicle purchases, public agencies may only use PFC 
revenue for the added cost of the low emission technology above the 
cost of a conventional emission vehicle. For vehicles being converted 
to low-emission technology, public agencies may only use PFC revenue 
for the reasonable cost of the conversion.
    The proposal would add paragraph (b)(8) to Sec.  158.15 to provide 
the eligibility requirements for low-emission vehicle projects. To be 
eligible, the airport must be located in an FAA and Environmental 
Protection Agency designated air quality nonattainment or maintenance 
area. In addition, the airport must receive emission credits for 
completing the project from the appropriate State air quality agency.
    Eligible projects must either (1) convert existing vehicles powered 
by diesel or gasoline engines to low-emission technology or the use of 
cleaner burning fuels, or (2) buy new vehicles that include low-
emission technology or use cleaner burning fuels.
    Interested parties are directed to the following Web site to obtain 
guidance on determining the eligibility of projects and how benefits to 
air quality must be demonstrated: http://www.faa.gov/arp/environmental/VALE/Index.cfm.

Use of Fees To Pay Debt Service

    Section 122 of Vision 100 amended the statute to permit an 
exception to use PFC revenue to pay the debt service costs of airport-
related projects that otherwise are not PFC-eligible if the public 
agency can show a financial need (49 U.S.C. 40117(b)(6)). The FAA 
expects that a public agency seeking relief under this provision wants 
to restore its financial stability and health. A proposed new 
definition, ``Financial need,'' would be added to Sec.  158.3. This 
definition would tie the financial need of a public agency to its 
ability to meet operational and debt obligations and maintain at least 
a 2-month reserve fund. Such financial need typically results from a 
series of events that cumulatively weaken the financial condition of 
the public agency. The FAA defines ``financial need'' based on 
information collected from several airports regarding their capital 
reserve funds and broadly accepted principles of airport financial 
fitness.
    Proposed paragraph (e) to Sec.  158.13 would provide an exception 
permitting the use of PFC revenue to pay debt service costs for a 
noneligible project.
    Proposed new Sec.  158.18 would provide for the use of PFC revenue 
to pay debt service cost for noneligible projects. Financial need is 
based on severe financial constraints suffered by the airport or public 
agency. This adverse financial position usually results from one or 
more events beyond the reasonable control of the public agency, 
resulting in a financial crisis for the airport. These events may 
include:
    (1) The bankruptcy of an air carrier serving the airport that 
results in rejecting leases for a significant portion of all air 
carrier gates at that airport;
    (2) Significantly reduced service by one or more air carriers that 
accounts for a major portion of the enplaned passenger traffic at the 
airport; or
    (3) Other dramatic changes in air carrier service patterns that 
undermine the ability of the public agency to pay for airport 
development already constructed.
    Other events, such as natural disasters, may also create a 
financial need for the public agency.
    A public agency should show that its financial recovery plan makes 
use of all available resources. The FAA would authorize an airport or 
public agency to impose a PFC under this paragraph only for the period 
necessary to cure the airport's or agency's financial need. 
Furthermore, the FAA expects the public agency to use any revenue saved 
by this PFC to return the airport to a state of financial fitness in as 
quick a period as possible. For example, use of the saved revenue to 
incur additional non-aeronautical debt or development costs would not 
return the airport to a state of financial fitness.
    A public agency applying for PFC revenue under this provision must 
use the application procedures in Sec.  158.25 and document its 
financial position by providing information regarding:
    (1) A change in passenger enplanements for a carrier;
    (2) Negative actions taken on the public agency's bond rating;
    (3) The inability of the public agency to meet bond payments and 
associated requirements;
    (4) Alternative sources of revenue available to the public agency, 
such as grant funds, state funds, concession revenue, vehicle parking 
fees, aircraft parking fees, other non-aviation fees, fuel taxes, and 
revenue from any other operators using the airport. (The submitted 
information must address whether these fees can be raised to create 
more revenue for the airport);
    (5) The impact of any necessary increases to the rate base or 
landing fees for concession and carrier revenue because of the loss of 
revenue from a change in economic circumstances (e.g., the bankruptcy 
or financial troubles of a carrier);
    (6) Actions taken by the public agency to reduce cost, such as 
operational changes, personnel actions, or capital project 
postponement;
    (7) The source(s) of revenue currently used to pay bond cost;
    (8) The current airport fee structure and methodology used to 
calculate rates and charges;
    (9) The affect of the loss of an air carrier or adding a new 
carrier on the current fee structure;
    (10) The planned use of revenue saved by using PFCs to pay the debt 
service and how this use will aid the return to financial fitness; and
    (11) Any other information the public agency believes will document 
the financial need of the airport.
    The FAA will use the procedures in Sec.  158.27 to analyze the 
information

[[Page 5191]]

submitted by the public agency, and then issue its decision on a case-
by-case basis under Sec.  158.29.

Clarification of Applicability of PFCs to Military Charters

    Section 123(c) of Vision 100 amended the PFC statute to prohibit 
collecting PFCs from passengers on military charter flights (49 U.S.C. 
400117(e)(2)). Proposed paragraph (a) (6) to Sec.  158.9 would clarify 
that passengers who do not pay directly for the air transportation due 
to Department of Defense charter arrangements or payments will not pay 
PFCs.

Financial Management of Passenger Facility Fees

    Section 124 of Vision 100 added specific requirements to protect 
PFC revenue from creditors when air carriers file for bankruptcy 
protection after the date of enactment of Vision 100 (49 U.S.C. 40117 
(m) (1-7)). Through this provision, Congress has specifically 
recognized and protected the trust fund status of PFC revenue and 
prohibited air carriers from using PFCs as security with third parties.
    Air carriers historically have commingled PFC revenue in accounts 
with other revenue until it was time to remit the PFC revenue to the 
various public agencies. Before Vision 100, in situations where an air 
carrier filed for bankruptcy protection and owed PFC remittances, 
public agencies had difficulties recovering past due PFCs. In part, 
these difficulties arose because the PFC revenue was commingled and, 
thus, difficult for bankruptcy courts to identify and public agencies 
to recover. Section 124 prohibits the commingling of PFC revenue with 
other revenue for air carriers in bankruptcy. In addition, section 124 
requires that air carriers in bankruptcy set up separate PFC accounts 
to handle PFC transactions--receipt of revenue from passengers and 
issuance of remittance to public agencies. This provision should enable 
bankruptcy courts to more easily identify PFC revenue for remittance to 
public agencies.
    The proposed rule would add a definition of ``covered air carrier'' 
to Sec.  158.3. The new definition states that a covered air carrier is 
an air carrier that has filed for bankruptcy protection or has had an 
involuntary proceeding started against it after December 12, 2003.
    In addition, the proposed rule would modify paragraph (b) of Sec.  
158.49, which allows air carriers to commingle PFC revenue with an air 
carrier's other sources of revenue, so that this paragraph does not 
apply to covered air carriers.
    A new paragraph (c) would be added to Sec.  158.49 requiring a 
covered air carrier segregate the PFC revenue into a designated PFC 
account when it enters bankruptcy protection. A covered air carrier 
would be required to set up the PFC account dedicated solely to PFCs, 
with a deposit equal to the average month's balance, based on the air 
carrier's past 12 months of PFC collections net of any credits or 
handling fees allowed by law. A covered air carrier would be required 
to ensure the account balance never falls below this initial fixed 
deposit amount (``PFC Reserve''). Besides the method proposed in this 
rulemaking, the FAA considered requiring the covered air carrier to 
keep a rolling balance in the designated PFC account. This rolling 
balance was based on an average of the previous 12 month's collections 
recalculated monthly as a method to calculate an amount that would be a 
fair account balance. The monthly recalculation would have captured 
situations where an airport served by the air carrier started PFC 
collections or increased its level of PFC collections after the PFC 
account was established. However, the FAA eventually concluded that 
recalculation on a rolling basis would be too burdensome on the covered 
air carrier and difficult for the FAA and the public agencies to 
monitor.
    The FAA recognizes that a covered air carrier may change its route 
structure during its bankruptcy and this change in route structure may, 
in turn, effect the average PFCs collected. Therefore, under the 
proposal a covered air carrier would be permitted to recalculate and 
reset the PFC Reserve and daily PFC amount on each successive 
anniversary date of its bankruptcy petition.
    Proposed paragraph (c) to Sec.  158.49 would allow a covered air 
carrier to deposit ticket sales revenue to its general operating 
account before separating the types of revenue. The proposal requires 
the covered air carrier to sweep its general operating account at least 
once a business day to take the PFC revenue initially deposited in this 
account and redeposit it in the PFC account. Through recent experience, 
the FAA has discovered that not all covered air carriers can judge the 
PFC collections on a daily basis. Accordingly, under the proposal, a 
covered air carrier that cannot accurately move the PFC revenue daily 
may elect to deposit into the PFC account daily, an estimated amount 
based on 1/30th of the PFC Reserve balance. A covered air carrier that 
sweeps with the estimated amount will be required to reconcile the PFC 
account for accuracy no later than the 20th of each month. This 
provision allows the covered air carrier to have an accurate PFC 
balance in place at the time of required PFC remittances.
    The proposed paragraph reiterates Congress' mandate to protect the 
trust fund status of PFC revenue. Even if the covered air carrier fails 
to follow the procedures in this paragraph, this trust fund status 
shall not be defeated by an inability of any party to identify and 
trace precise amounts of PFC revenue in the air carrier's accounts. The 
proposed paragraph also prohibits a covered air carrier and its agents 
from granting a security or other interest in the PFC revenue to a 
third party.
    Proposed paragraph (c) also provides that, if a public agency is 
forced to incur costs to recover PFC revenue because the covered air 
carrier failed to comply with these new PFC revenue-handling 
procedures, the covered air carrier is required to compensate the 
public agency for its costs. This provision applies to costs incurred 
by a public agency in pursuit of PFCs owed if a covered air carrier 
fails to make its PFC payments under the statute or rule (49 U.S.C. 
40117(m)(4).
    Proposed paragraph (b) to Sec.  158.53 would state that a covered 
air carrier is entitled to keep the interest portion of the 
compensation only as long as the air carrier follows the procedures in 
Sec.  158.49.
    Proposed paragraph (b) to Sec.  158.65 would require that, besides 
reporting to the public agencies, covered air carriers must send a copy 
of their quarterly report to the FAA. Covered air carriers also will be 
required to send a PFC account statement to the FAA on the fifth day of 
the month. The account statement will include the balance of their PFC 
account, the balance of their PFC reserve amount, total PFC funds 
deposited, and total PFC funds dispersed. This monthly report allows 
the FAA to monitor the covered air carrier's compliance with the 
requirements of Sec.  158.49. The monthly report must continue while a 
covered air carrier remains in a bankruptcy proceeding.

Cost Sharing of Air Traffic Modernization Projects

    Section 183 of Vision 100 set up a program to allow cost sharing of 
air traffic modernization projects (49 U.S.C. 44517(a)). This program 
is intended to improve aviation safety and the mobility of the Nation's 
air transportation system by encouraging non-Federal investment in 
critical air traffic control equipment and software. Under this program 
the

[[Page 5192]]

FAA may make grants to eligible sponsors to pay a portion of the cost 
of FAA-approved projects to procure and install air traffic facilities 
and equipment. The program is intended to allow sponsors to achieve 
accelerated deployment of eligible facilities and equipment and to help 
expand aviation infrastructure. The sponsor may fund the non-Federal 
portion of the project costs through various methods including the use 
of PFC revenue.
    If a public agency wishes to use PFC revenue to pay for all or a 
portion of the non-Federal share of the project, the public agency must 
first obtain authority to impose a PFC and use PFC revenue under the 
procedures in Sec. Sec.  158.25 or .30.
    Currently, paragraph (d) of Sec.  158.13 allows the use of PFC 
revenue to pay for the non-Federal share of costs for a project funded 
under the Federal airport grant program. This paragraph will be 
renumbered as paragraph (g) and expanded to include the FAA's ``program 
to permit cost-sharing of air traffic modernization projects.''
    A new proposed paragraph (8) to Sec.  158.15(b) would list a 
project approved under the FAA's program to allow cost sharing of air 
traffic modernization projects as PFC-eligible.

Changes Because of Technological Improvements

    Major examples of technological improvements since the PFC program 
inception in 1990 are the use of electronic or paperless airline 
ticketing, the use of electronic mail to send documents, and web sites 
to post information.
    The existing procedures for collection of PFCs from passengers were 
developed based on the assumption that ticket issuance would require a 
physical transaction, including the issuance of a paper airline ticket 
and a physical ticket issuance. Today, passengers can buy airline 
tickets using many methods, including the internet, and many air 
carriers no longer issue paper tickets. Furthermore, airline code-
sharing and global alliances that have expanded ticketing options were 
not widely in place in 1990.
    Currently, carriers have several options for PFC collection if the 
ticket is issued outside the U.S., including non-collection of any PFCs 
if the carrier does not serve a point in the U.S. Furthermore, airline 
code-sharing and global alliances, which were not common in 1990, have 
grown and created the potential for mistakenly administered and 
mishandled PFCs. A person living in the United States may buy airline 
tickets for domestic travel over the internet from a foreign carrier. 
Such transactions may confuse foreign carriers, especially those who do 
not have significant operations in the U.S., when determining the 
proper procedures to follow. To address these issues, the FAA is 
proposing several changes to part 158.
    The proposal would define the ``point of issuance of airline 
tickets'' in Sec.  158.3 to include electronic and other ticketing 
mediums. The definition of ``air travel ticket'' would be expanded to 
bring the definition in line with the varying methods of ticketing, 
including electronic records, boarding passes, and any other ticketing 
medium. In reference to a passenger's itinerary, the word ``complete'' 
would be removed since today's passengers may obtain documents, 
including a receipt showing the PFCs paid on each leg of their 
itinerary.
    Proposed paragraph (a) of Sec.  158.47 would clarify that U.S. and 
foreign air carriers must follow the requirements of Sec.  158.45 when 
the itinerary is for travel within the U.S. regardless of the location 
of the ticket issuance.
    The second technological improvement addressed by this proposal is 
the submission of information. Current air carrier quarterly reporting 
requirements in part 158 provide public agencies with information about 
PFC revenue remitted to the public agency, refunded to passengers, and 
retained by the air carrier. Air carrier quarterly reports allow public 
agencies to monitor their collections and identify any discrepancies in 
a timely manner.
    The FAA has developed a national PFC database that stores 
information on PFC application and project approvals. Before issuing a 
final rule, the FAA expects to develop modules to collect the same 
types of information directly from the public agencies and air carriers 
for quarterly reports.
    A comment submitted to the NPRM that was the basis of the 2005 
final rule suggested the FAA eliminate the monthly and quarterly 
reports filed by air carriers to public agencies and, instead, create 
an air carrier annual report with currently required information. Since 
this comment was outside the scope of that notice, the FAA stated that 
it would consider the comment for inclusion in a future rulemaking.
    Part 158 includes an air carrier reporting requirement to provide 
public agencies with information about the amount of PFC revenue 
remitted to the public agency, refunded to passengers, and retained by 
the carrier. The FAA determined that a quarterly report allows public 
agencies to monitor their collections and identify any discrepancies in 
a timely manner.
    Paragraph (a) of proposed Sec.  158.20 would permit public agencies 
and air carriers to send required documents such as letters, reports, 
and certifications of agreement/disagreement by e-mail, facsimile, 
courier, or regular mail. Paragraph (b) provides that public agencies 
and air carriers may use the PFC national database to post their 
quarterly reports. Thus, the FAA will not require public agencies and 
air carriers using this database to use U.S. Postal Services to send 
their quarterly reports to interested parties.
    To accommodate the interests of as many public agencies as 
possible, the FAA will maintain the requirement in Sec.  158.65 that 
the air carriers provide quarterly reports or input into the national 
PFC database. A public agency will be able to view these reports any 
time.

Changes To Streamline PFC Procedures, Codify PFC Policies, or Address 
Issues or Questions About the PFC Program

    As the PFC program has developed, the FAA has recognized the need 
to streamline its existing policies. The discussions below identify 
certain areas where we are proposing changes to the current rule. 
Section 158.3 would redefine or add several definitions for terms 
currently in use. The first two definition changes result from new 
terms introduced with the nonhub program. The third new definition 
claries existing FAA policy.
    <bullet> ``Approved project'' would be revised to ensure that 
projects acknowledged under the non-hub program are included in the 
definition. Under the non-hub program, the FAA ``acknowledges'' the 
notice of intent and the projects contained therein. However, there are 
many sections of part 158 that are applicable to projects being 
financed with PFC revenue and, thus, are applicable to both approved 
and acknowledged projects.
    <bullet> ``Notice of intent (to impose a PFC or use PFC revenue)'' 
is a term used in the non-hub PFC authorization procedures. Public 
agencies receiving PFC authorization under the non-hub procedures must 
comply with all rules of the PFC program outside the authorization 
procedures in Sec.  158.25. PFC authorizations for these other 
applications are identified as PFC applications and part 158 makes many 
references to ``PFC application'' or just ``application.'' Rather than 
adding the term ``notice of intent'' at every location where the term 
``application'' is used,

[[Page 5193]]

the FAA is proposing to add a definition of ``notice of intent.'' The 
proposed definition would include a statement to clarify that, except 
for those sections of part 158 that deal with specific authorization 
procedures, the terms ``notice of intent'' and ``application'' should 
be used interchangeably.
    <bullet> The FAA has been approving collection of PFC revenue to 
pay for a public agency's cost of administering its PFC program based 
on the existing definition of the allowable costs in part 158. However, 
part 158 does not include a definition of the types of costs covered 
under PFC administrative support costs. Adding a definition for ``PFC 
administrative support costs'' would clarify the types of costs that 
public agencies should identify as PFC administrative support costs.
    About 10 years ago, the FAA adopted a policy of advising public 
agencies to apply for PFC administrative support costs as a separate 
project. This policy has allowed the FAA to monitor more closely the 
public agency's costs and review the scope of work. However, not all 
public agencies have complied with this policy. Some public agencies 
include their administrative support costs within their development 
projects, resulting in inaccurate cost estimates for both the 
development projects and the administrative costs. The proposed rule 
would add paragraph (b) to Sec.  158.13 providing that public agencies 
may use PFC revenue to pay for allowable PFC administrative support 
costs. The new paragraph would direct that public agencies treat PFC 
administrative support costs as a separate and distinct PFC project in 
a PFC application or notice of intent.
    The PFC program is available to States, territories, Commonwealths, 
and possessions of the United States. Initially, the Trust Territory of 
the Pacific Islands was a territory of the U.S. and, thus, was eligible 
to participate in the PFC program. The Compact of Free Association 
between the U.S., Marshall Islands, and Federated States of Micronesia 
provided that newly independent States would be eligible to participate 
in Federal programs, such as the PFC program, for 15 years after 
adopting the Compact. The 15-year period ended in 2001, and the 
Marshall Islands and Federated States of Micronesia are no longer 
eligible to participate in the PFC program. Therefore, the definition 
for ``State'' would be redefined to remove the Trust Territory of the 
Pacific Islands.
    This proposal changes the current title of Sec.  158.30 to ``PFC 
Authorization at Non-Hub Airports.'' This proposed change clarifies 
that PFC authorizations at non-hub airports relate to size of airport 
and not to aircraft pilots at non-hub airports. The sunset provision in 
paragraph (h) remains in effect (49 U.S.C. 40117(l)(7)).
    The proposed editorial changes in Sec.  158.31 clarify the intent 
of the original language.
    Proposed paragraphs (a)(2), (c)(1), and (c)(2) of Sec.  158.33 
would clarify the term ``charge effective date.'' A public agency may 
only collect on one PFC decision at a time meaning the charge effective 
date for a subsequent application must be on or after the charge 
expiration date for the current application.
    The FAA wrote Sec.  158.33 to require public agencies to take 
certain actions within a prescribed period of time after the charge 
effective date of an application. However, a literal reading of the 
current regulation could lead to the belief that, for example, a 
project approved for collection in 2005 in an application with a charge 
effective date of 2016 need not be implemented for 11 years. The FAA 
interprets the timelines in Sec.  158.33 with regard to the start of 
collections for an application as being either the charge effective 
date or the date the application was approved.
    Section 158.37 requires a public agency to consult with air 
carriers and provide notice and the opportunity for public comment if 
the public agency is seeking to increase the PFC amount of a project by 
more than 25 percent of the originally approved amount. While the FAA 
believes the 25 percent threshold is reasonable, an excess of 
amendments could overburden the consultation and comment processes, 
requiring consultation for insignificant amounts. For example, the FAA 
has approved several projects for amounts of $1,000 or less. Under the 
current rules, an increase of $250 to a $1,000 project would trigger 
the need for consultation and public comment.
    The FAA examined the existing universe of PFC projects and 
concluded that over 75 percent of these projects have a PFC cost below 
$1 million. Generally, these projects have well-established costs. 
Increases are often sought because of changes in quantities or 
differences in estimated or actual costs. Furthermore, the FAA rarely 
receives substantive comments from air carriers or the public on 
projects with PFC costs below $1 million. This proposed rule would 
modify Sec.  158.37 to provide a minimum dollar threshold. For projects 
with originally approved amounts at or above this threshold, an 
increase of more than 25 percent would trigger the need for 
consultation and public comment. For projects with originally approved 
amounts below this threshold, public agencies will not need to consult 
with air carriers and provide the opportunity for public comment, 
regardless of the percentage increase in costs proposed. Paragraphs 
(b)(1)(i)(A), (b)(1)(ii)(C), (b)(1)(ii)(D), and (b)(5) would be 
modified to address this proposed threshold.
    This proposed rule would clarify the language in paragraph (a) of 
Sec.  158.39 by adding ``earned thereon'' after `` * * * plus 
interest.'' A public agency must include the PFC principal and the 
interest earned thereon in determining whether it has collected the 
total amount of PFC revenue authorized.
    Proposed paragraph (d) of Sec.  158.39 would delete ``under Sec.  
158.25(c)'' from the second sentence. As discussed earlier in the 
notice of intent definition, ``notice of intent'' may be used 
interchangeably with ``PFC application.''
    Currently, paragraph (b)(3) of Sec.  158.43 requires a public 
agency to set its charge effective date as the first day of a month at 
least 60 days from the date the notice was sent to air carriers. Since 
its beginning, however, air carriers have developed procedures for 
programming new PFC collections at airports and are able to perform 
this programming in 30 days. This proposal would change the requirement 
to 30 days in paragraph (b)(3) of Sec.  158.43.
    Current FAA policy requires at least 30 days notice to allow air 
carriers enough time to reprogram their systems. However, public 
agencies continue to make changes with less than 30 days notice. 
Occasionally, this results in the FAA not processing the change and the 
public agency's collection is either prematurely stopped or extended a 
month beyond the intended expiration date. The proposed rule would 
modify paragraph (c) of Sec.  158.43 to require that public agencies 
notify air carriers and the FAA at least 30 days before changing the 
charge expiration date.
    The proposed rule would modify paragraphs (a)(3) of Sec.  158.45 
and (c)(4) of Sec.  158.47 to clarify that failure to travel on a 
nonrefundable or expired airline ticket is not a change in itinerary. 
Ticket purchasers holding nonrefundable or expired tickets are not 
entitled to a refund of any associated PFCs if the ticket purchaser is 
not entitled to any fare refund.
    The PFC statute requires the FAA set up a uniform collection 
compensation amount reflecting the ``average reasonable and necessary 
expenses'' of the air carriers' collection and handling of the PFC (49 
U.S.C. 40117 (i)(2)(C)). A periodic review of the collection 
compensation rate is fair and reasonable because of changing air 
carrier PFC

[[Page 5194]]

handling costs. The costs may include handling, reporting, escrow, 
collecting, and remittance fees. The proposed rule would provide for 
periodic review outside the formal rulemaking process.
    In the future, the FAA plans periodically to publish a notice in 
the Federal Register asking that air carriers voluntarily provide data 
on their costs associated with the PFC program. Proposed paragraph (c) 
of Sec.  158.53 would include a list of the 11 categories of cost data 
the FAA tentatively has determined represent the incremental costs 
directly associated with PFC collection, handling, remittance, 
reporting, recording keeping, and auditing by air carriers. If the FAA 
determines a new level is warranted, we would publish a second Federal 
Register notice seeking public comment. We would publish a third notice 
in the Federal Register providing a final determination.
    The FAA has developed its national PFC database and identified the 
need for national consistency in the information reported. This 
database allows public agencies to input the revenue received on either 
a monthly or quarterly basis. The FAA chose the actual revenue received 
method rather than accrual basis method because actual basis is more 
closely tied to when PFC collections are completed. This proposal would 
modify paragraph (a) of Sec.  158.63 to clarify that public agencies 
must report revenue actually received from the air carriers rather than 
on an accrual basis.
    Currently, large and medium hub airports are required to file their 
annual PFC revenue forecasts by August 1. The FAA set the August 1 date 
based on when it usually received its first estimates on airport 
enplanements and, thus, could make the first estimates on AIP 
apportionments for the upcoming fiscal year. The FAA streamlined its 
process for gathering enplanement data and now makes its AIP 
apportionment estimates about July 1. The proposal would modify 
paragraph (c) of Sec.  158.63 to specify July 1 as the date that large 
and medium hub airports report their forecast PFC revenue for the 
upcoming Federal fiscal year.
    This proposal would delete Sec.  158.97, Special rule for 
transitioning airports, which expired at the end of Federal fiscal year 
2004.
    Experience has shown that most PFC projects are physically 
completed long before they are financially completed. This contrasts 
with AIP grant projects where the financial completion of the project 
follows quickly after the project's physical completion. This proposal 
would modify assurance 10 of part B of Appendix A to part 158 to add 
``physical and financial'' before ``completion'' in the first sentence 
to clarify the time public agencies need to retain their records.
    The proposal would also update several authorization citations.

------------------------------------------------------------------------
                                                 Reference
            Location             ---------------------------------------
                                         From                 To
------------------------------------------------------------------------
Sec.   158.67(c)(2).............  Single Agency       Office of
                                   Audit Act of 1984   Management and
                                   (31 U.S.C. 7501-    Budget Circular A-
                                   7).                 133 (The Single
                                                       Audit Act of
                                                       1984, P.L. 98-
                                                       502, and the
                                                       Single Audit Act
                                                       Amendments of
                                                       1996, P.L. 104-
                                                       156).
Sec.   158.81...................  Airport Noise and   49 U.S.C. 47523
                                   Capacity Act of     through 47528.
                                   1990.
Assurance 12 of part B of         Airport Noise and   49 U.S.C. 47523
 Appendix A.                       Capacity Act of     through 47528.
                                   1990.
------------------------------------------------------------------------

Economic Assessment, Regulatory Flexibility Determination, Trade Impact 
Assessment, and Unfunded Mandates Assessment Economic Assessment

    Proposed changes to Federal regulations must undergo several 
economic analyses. First, Executive Order 12866 directs each Federal 
agency to propose or adopt a regulation only on a reasoned 
determination the benefits of the intended regulation justify its 
costs. Second, the Regulatory Flexibility Act of 1980 requires agencies 
to analyze the economic impact of regulatory changes on small entities. 
Third, the Trade Agreements Act prohibits agencies from setting 
standards that create unnecessary obstacles to the foreign commerce of 
the United States. In developing U.S. standards, the Trade Agreements 
Act also requires agencies to consider international standards and, 
where appropriate, use them as the basis of U.S. standards. Fourth, the 
Unfunded Mandates Reform Act of 1995 requires agencies to prepare a 
written assessment of the costs, benefits, and other effects of 
proposed or final rules that include a Federal mandate likely to result 
in the expenditure by State, local, or tribal governments, in the 
aggregate, or by the private sector, of $100 million or more annually 
(adjusted for inflation.)
    In conducting these analyses, the FAA has determined this proposed 
rule (1) has benefits that justify its costs, is not a ``significant 
regulatory action'' as defined in section 3(f) of Executive Order 12866 
and is not ``significant'' as defined in the DOT's Regulatory Policies 
and Procedures; (2) would not have a significant economic impact on a 
substantial number of small entities; (3) would not have an effect on 
international trade; and (4) would not impose an unfunded mandate on 
State, local, or tribal governments, or on the private sector. These 
analyses, available in the preliminary regulatory evaluation supporting 
today's rule, are summarized below.

Costs of This Rulemaking

    Vision 100 mandates some changes to the PFC process that are not 
subject to the FAA's discretion. Changes other than those prescribed by 
Vision 100 are discretionary and the costs and cost savings are 
estimated in the table below.

----------------------------------------------------------------------------------------------------------------
                                                                                     Net cost
                     Sector                            Costs       Cost  savings      savings     Present  value
----------------------------------------------------------------------------------------------------------------
Airports........................................         $17,100      $1,638,600      $1,621,500      $1,138,300
Airlines........................................          63,000       1,481,100       1,418,100         993,000
FAA.............................................         971,500         235,900       (735,600)       (737,700)
                                                 -----------------
    Total.......................................       1,051,600       3,355,600       2,304,000       1,393,600
----------------------------------------------------------------------------------------------------------------


[[Page 5195]]

Regulatory Flexibility Assessment

    The Regulatory Flexibility Act of 1980 (RFA) establishes ``as a 
principle of regulatory issuance that agencies shall endeavor, 
consistent with the objective of the rule and of applicable statutes, 
to fit regulatory and informational requirements to the scale of the 
business, organizations, and governmental jurisdictions subject to 
regulation.'' To achieve that principle, the RFA requires agencies to 
consider flexible regulatory proposals, to explain the rationale for 
their actions, and to solicit comments. The RFA covers a wide-range of 
small entities, including small businesses, not-for-profit 
organizations and small governmental jurisdictions.
    Agencies must perform a review to determine whether a rulemaking 
action will have a significant economic impact on a substantial number 
of small entities. If the agency determines that it will, the agency 
must prepare a regulatory flexibility analysis as described in the Act.
    However, if an agency determines that a rulemaking action is not 
expected to have a significant economic impact on a substantial number 
of small entities, section 605(b) of the 1980 RFA provides that the 
head of the agency may so certify and a regulatory flexibility analysis 
is not required. The certification must include a statement providing 
the factual basis for this determination, and the reasoning should be 
clear.
    The FAA believes that this proposal would not have a significant 
impact on a substantial number of entities. An airport operator (North 
American Industry Classification System (NAICS) 488119) is classified 
as a small entity if it has annual revenues of $6 million or less. The 
average revenue for these airports was $1.7 million, and the median 
revenue was $1.1 million for 2003. The entire cost to all airports is 
estimated to be $17,100. Thus, no small airport would experience a 
significant economic impact. A scheduled or nonscheduled passenger air 
carrier (NAICS 481111) is considered a small entity if it has 1,500 or 
fewer employees. The FAA has identified 57 air carriers with 
authorization to carry passengers that meet this classification. Small 
carriers that collect PFCs would not be adversely affected since any 
adjustments to modify ticketing or other administrative costs that 
small air carriers may incur as a result of this proposed rule are 
recoverable under the existing compensation provisions.
    Therefore, the FAA Administrator certifies that this rule will not 
have a significant economic impact on a substantial number of small 
entities.

International Trade Impact Assessment

    The Trade Agreements Act of 1979 prohibits Federal agencies from 
establishing any standards or engaging in related activities that 
create unnecessary obstacles to the foreign commerce of the United 
States. Legitimate domestic objectives, such as safety, are not 
considered unnecessary obstacles. The statute also requires 
consideration of international standards and, where appropriate, they 
be the basis for U.S. standards. Foreign carriers would be required to 
collect PFCs on wholly domestic U.S. travel that U.S. carriers are 
already required to collect, and the foreign carriers would be entitled 
to the same compensation provisions as U.S. carriers. The FAA has 
assessed the potential effect of this proposed rule and determined that 
it would impose the same costs on domestic and international entities 
and, thus, have a neutral trade impact.

Unfunded Mandates Assessment

    The Unfunded Mandates Reform Act of 1995 (the Act) is intended, 
among other things to curb the practice of imposing unfunded Federal 
mandates on State, local, and tribal governments. Title II of the Act 
requires each Federal agency to prepare a written statement assessing 
the effects of any Federal mandate in a proposed or final agency rule 
that may result in an expenditure of $100 million or more (adjusted 
annually for inflation) in any one year by State, local, and tribal 
governments, in the aggregate, or by the private sector; such a mandate 
is deemed to be a ``significant regulatory action.'' The FAA currently 
uses an inflation-adjusted value of $120.7 million in lieu of $100 
million. This proposed rule does not contain such a mandate. Therefore, 
the requirements of Title II of the Unfunded Mandates Reform Act of 
1995 do not apply.

Executive Order 13132, Federalism

    The FAA has analyzed this proposed rule under the principles and 
criteria of Executive Order 13132, Federalism. We determined that this 
action would not have a substantial direct effect on the States, on the 
relationship between the national Government and the States, or on the 
distribution of power and responsibilities among the various levels of 
government, and therefore would not have federalism implications.

Paperwork Reduction Act

    This proposal contains the following new information collection 
requirements: Covered Air Carrier Monthly Escrow Account Report. In 
addition, the proposal contains changes in some existing public agency 
and air carrier reporting requirements. As required by the Paperwork 
Reduction Act of 1995 (44 U.S.C. 3507(d)), the FAA has submitted the 
information requirements associated with this proposal to the Office of 
Management and Budget for its review.
    Title: Passenger Facility Charge Program, Debt Service, Air Carrier 
Bankruptcy, and Miscellaneous Changes

International Compatibility

    In keeping with U.S. obligations under the Convention on 
International Civil Aviation, it is FAA policy to comply with 
International Civil Aviation Organization (ICAO) Standards and 
Recommended Practices to the maximum extent practicable. The FAA has 
determined there are no ICAO Standards and Recommended Practices that 
match these proposed regulations.

Plain English

    Executive Order 12866 (58 FR 51735, Oct. 4, 1993) requires each 
agency to write regulations that are simple and easy to understand. We 
invite your comments on how to make these proposed regulations easier 
to understand, including answers to questions such as the following:
    <bullet> Are the requirements in the proposed regulations clearly 
stated?
    <bullet> Do the proposed regulations contain unnecessary technical 
language or jargon that interferes with their clarity?
    <bullet> Would the regulations be easier to understand if they were 
divided into more (but shorter) sections?
    <bullet> Is the description in the preamble helpful in 
understanding the proposed regulations?
    Please send your comments to the address specified in the ADDRESSES 
section.

Environmental Analysis

    Environmental Analysis FAA Order 1050.1E identifies FAA actions 
that are categorically excluded from preparation of an environmental 
assessment or environmental impact statement under the National 
Environmental Policy Act in the absence of extraordinary circumstances. 
The FAA has determined this proposed rulemaking action qualifies for 
the categorical exclusion identified in paragraph 3f and involves no 
extraordinary circumstances.

[[Page 5196]]

Regulations That Significantly Affect Energy Supply, Distribution, or 
Use

    The FAA has analyzed this proposed rulemaking under Executive Order 
13211, Actions Concerning Regulations that Significantly Affect Energy 
Supply, Distribution, or Use (May 18, 2001). We have determined that it 
is not a ``significant energy action'' under the executive order 
because it is not a ``significant regulatory action'' under Executive 
Order 12866, and it is not likely to have a significant adverse effect 
on the supply, distribution, or use of energy.

List of Subjects in 14 CFR Part 158

    Air carriers, Airports, Passenger facility charge, Public agencies, 
Collection compensation.

The Proposed Amendment

    Because of the above, the Federal Aviation Administration proposes 
to amend part 158 of Title 14, Code of Federal Regulations, as follows:

PART 158--PASSENGER FACILITY CHARGES (PFCs)

Subpart A--General

    1. The authority citation for part 158 continues to read as 
follows:

    Authority: 49 U.S.C. 106(g), 40116-40117, 47106, 47111, 47114-
47116, 47524, 47526.

    2. Amend Sec.  158.3 as follows:
    a. Revise the definitions for Air travel ticket, Approved Project, 
and State to read as set forth below.
    b. Add definitions for Covered air carrier, Financial need, Ground 
support equipment, Notice of intent (to impose a PFC or use PFC 
revenue), PFC administrative support costs, and Point of issuance for 
electronic tickets or other ticketing medium in alphabetical order to 
read as set forth below.


Sec.  158.3  Definitions.

* * * * *
    Air travel ticket includes all documents, electronic records, 
boarding passes, and any other ticketing medium about a passenger's 
itinerary necessary to transport a passenger by air, including 
passenger manifests.
* * * * *
    Approved project means a project for which the FAA has approved 
using PFC revenue under this part. The FAA may also approve specific 
projects contained in a single or multi-phased project or development 
described in an airport capital plan separately. This includes projects 
acknowledged by the FAA under Sec.  158.30 of this part.
* * * * *
    Covered air carrier means an air carrier that files for bankruptcy 
protection, or has an involuntary bankruptcy proceeding started against 
it after December 12, 2003.
* * * * *
    Financial need means that a public agency cannot meet its 
operational or debt service obligations and does not have at least a 2-
month reserve fund.
* * * * *
    Ground support equipment means service and maintenance equipment 
used at an airport to support aeronautical operations and related 
activities. Baggage tugs, belt loaders, cargo loaders, forklifts, fuel 
trucks, lavatory trucks, and pushback tractors are among the types of 
vehicles that fit this definition.
* * * * *
    Notice of intent (to impose a PFC or use PFC revenue) means a 
notice under Sec.  158.30 from a public agency controlling a non-hub 
airport that it intends to impose a PFC and or use PFC revenue. Except 
for Sec. Sec.  158.25 through 30, ``notice of intent'' can be used 
interchangeably with ``application.''
* * * * *
    PFC administrative support costs means the reasonable and necessary 
costs of developing a PFC application or amendment, issuing and 
maintaining the required PFC records, and performing the required audit 
of the public agency's PFC account. These costs may include reasonable 
monthly financial account charges and transaction fees.
    Point of issuance of airline tickets means the billing address of 
the buyer's credit card or the physical location of a cash or check 
transaction.
* * * * *
    State means a State of the United States, the District of Columbia, 
the Commonwealth of Puerto Rico, the Virgin Islands, American Samoa, 
the Commonwealth of the Northern Mariana Islands, and Guam.
* * * * *
    3. Amend Sec.  158.9 by revising paragraphs (a)(4) and (5) and by 
adding paragraph (a)(6) to read as follows:


Sec.  158.9  Limitations.

    (a) * * *
    (4) On flights, including flight segments, between 2 or more points 
in Hawaii;
    (5) In Alaska aboard an aircraft having a certificated seating 
capacity of fewer than 60 passengers; or
    (6) Enplaning at an airport if the passenger did not pay for the 
air transportation that resulted in the enplanement because of 
Department of Defense charter arrangements and payments.
* * * * *
    4. Amend Sec.  158.13 by revising paragraphs (b), (c), (d), and (e) 
and adding paragraphs (f), (g), and (h) to read as follows:


Sec.  158.13  Use of PFC revenue.

* * * * *
    (b) PFC administrative support costs. Public agencies may use PFC 
revenue to pay for allowable administrative support costs. Public 
agencies must submit these costs as a separate project in each PFC 
application.
    (c) Maximum cost for certain low-emission technology projects. If a 
project involves a vehicle or ground support equipment using low 
emission technology eligible under 158.15(b), the FAA will determine 
the maximum cost that may be financed by PFC revenue. The maximum cost 
for a new vehicle is the incremental amount between the purchase price 
of a new low emission vehicle and the purchase price of a standard 
emission vehicle, or the cost of converting a standard emission vehicle 
to a low emission vehicle.
    (d) Bond-associated debt service and financing costs.
    (1) Public agencies may use PFC revenue to pay debt service and 
financing costs incurred for a bond issued to carry out approved 
projects.
    (2) If the public agency's bond documents require that PFC revenue 
be commingled in the general revenue stream of the airport and pledged 
for the benefit of holders of obligations, the FAA considers PFC 
revenue to have paid the costs covered in Sec.  158.13(b)(1) if--
    (i) An amount equal to the part of the proceeds of the bond issued 
to carry out approved projects is used to pay allowable costs of such 
projects; and
    (ii) To the extent the PFC revenue collected in any year exceeds 
the debt service and financing costs on such bonds during that year, an 
amount equal to the excess is applied as required by Sec.  158.39.
    (e) Exception providing for the use of PFC revenue to pay for debt 
service for non-eligible projects. The FAA may authorize a public 
agency under Sec.  158.18 to impose a PFC for payments for debt service 
or indebtedness incurred to carry out an airport project that is not 
eligible if the FAA determines that such use is necessary because of 
the financial need of the public agency.
    (f) Combination of PFC revenue and Federal grant funds. A public 
agency may combine PFC revenue and airport grant funds to carry out an 
approved

[[Page 5197]]

project. These projects are subject to the record keeping and auditing 
requirements of this part, as well as the reporting, record keeping and 
auditing requirements imposed by the Airport and Airway Improvement Act 
of 1982 (AAIA).
    (g) Non-Federal share. Public agencies may use PFC revenue to meet 
the non-Federal share of the cost of projects funded under the Federal 
Airport Improvement Program or the FAA ``Program to Permit Cost-Sharing 
of Air Traffic Modernization Projects'' under 49 U.S.C. 44517.
    (h) Approval of project following approval to impose a PFC. The 
public agency may not use PFC revenue or interest earned thereon except 
on an approved project.
    5. Amend Sec.  158.15(b) by revising paragraphs (5) and (6) and 
adding paragraphs (7) and (8) to read as follows:


Sec.  158.15  Project eligibility at PFC levels of $1, $2, or $3.

* * * * *
    (b) * * *
    (5) Noise compatibility measures eligible for Federal assistance 
under 49 U.S.C. 47504, without regard to whether the measures are 
approved under 49 U.S.C. 47504;
    (6) Construction of gates and related areas at which passengers are 
enplaned or deplaned and other areas directly related to the movement 
of passengers and baggage in air commerce within the boundaries of the 
airport. These areas do not include restaurants, car rental and 
automobile parking facilities, or other concessions. Projects required 
to enable added air service by an air carrier with less than 50 percent 
of the annual passenger boardings at an airport have added eligibility. 
Such projects may include structural foundations and floor systems, 
exterior building walls and load-bearing interior columns or walls, 
windows, door and roof systems, building utilities (including heating, 
air conditioning, ventilation, plumbing, and electrical service), and 
aircraft fueling facilities next to the gate; or
    (7) A project approved under the FAA's ``Program to Permit Cost-
Sharing of Air Traffic Modernization Projects.'' under 49 U.S.C. 44517; 
or
    (8) If the airport is in an air quality nonattainment area (as 
defined by section 171(2) of the Clean Air Act (42 U.S.C. 7501(2)) or a 
maintenance area referred to in section 175A of such Act (42 U.S.C. 
7505a), and the project will result in the airport receiving 
appropriate emission credits as described in 14 CFR 47139, a project 
for:
    (i) Converting vehicles and ground support equipment powered by a 
diesel or gasoline engine used at a commercial service airport to low-
emission technology certified or verified by the Environmental 
Protection Agency to reduce emissions or to use cleaner burning 
conventional fuels; or
    (ii) Acquiring for use at a commercial service airport vehicles and 
ground support equipment that include low-emission technology or use 
cleaner burning fuels.
* * * * *
    6. Add Sec.  158.18 to read as follows:


Sec.  158.18  Use of PFC revenue to pay for debt service for non-
eligible projects.

    (a) The FAA may authorize a public agency to impose a PFC on 
payments for debt service or indebtedness incurred to carry out an 
airport project that is not eligible if the FAA determines it is 
necessary because of the financial need of the public agency. The FAA 
defines financial need in Sec.  158.3.
    (b) A public agency may request authority to impose a PFC and use 
PFC revenue under this section using the PFC application procedures in 
Sec.  158.25. The public agency must document its financial position 
and explain its financial recovery plan that uses all available 
resources.
    (c) The FAA reviews the application using the procedures in Sec.  
158.27. The FAA will issue its decision on the public agency's request 
under Sec.  158.29.
    7. Add Sec.  158.20 to read as follows:


Sec.  158.20  Submission of required documents.

    (a) Letters and reports required by this part may be transmitted to 
the appropriate recipient (the public agency, air carrier, and/or the 
FAA) via e-mail, courier, facsimile, or U.S. Postal Service.
    (1) Documents sent electronically to the FAA must be prepared in a 
format readable to the FAA. Interested parties can obtain the format at 
the local FAA Airports Office.
    (2) Any transmission to FAA Headquarters, using regular U.S. Postal 
Service, is subject to inspection that may result in delay and damage 
due to the security process.
    (b) Public agencies and air carriers may use the FAA's national PFC 
database to post their required quarterly reports, and, in that case, 
do not have to distribute the reports in any other way.

Subpart B--Application and Approval

    8. Revise Sec.  158.29(a)(1)(ii) and (b)(1)(ii) to read as follows:


Sec.  159.29  The Administrator's Decision.

    (a) * * *
    (1) * * *
    (ii) The project will achieve the objectives and criteria set forth 
in Sec.  158.15 except for those projects approved under Sec.  158.18.
* * * * *
    (b) * * *
    (1) * * *
    (ii) The project will achieve the objectives and criteria set forth 
in Sec.  158.15 except for those projects approved under Sec.  158.18.
* * * * *
    9. Amend Sec.  158.30 by revising the section heading to read as 
follows:


Sec.  158.30  PFC Authorization at Non-Hub Airports.

* * * * *
    10. Amend Sec.  158.31 by revising the introductory text and 
paragraph (b) to read as follows:


Sec.  158.31  Duration of authority to impose a PFC after project 
implementation.

    A public agency that has begun implementing an approved project may 
impose a PFC until--
* * * * *
    (b) The total PFC revenue collected plus interest earned thereon 
equals the allowable cost of the approved project;
* * * * *
    11. Amend Sec.  158.33 by revising paragraphs (a)(2), (c)(1) 
introductory text, and (c)(2) to read as follows:


Sec.  158.33  Duration of authority to impose a PFC before project 
implementation.

    (a) * * *
    (2) 5 years after the charge effective date, or the date of the 
FAA's decision on the application (if the charge effective date is more 
than 60 days after the decision date) if an approved project is not 
implemented.
* * * * *
    (c) * * *
    (1) 3 years after the charge effective date, or the date of the 
FAA's decision on the application (if the charge effective date is more 
than 60 days after the decision date) unless--
* * * * *
    (2) 5 years after the charge effective date, or the date of the 
FAA's decision on the application (if the charge effective date is more 
than 60 days after the decision date) unless the public agency has 
obtained project approval.
* * * * *
    12. Amend Sec.  158.37 by revising the section heading, paragraphs 
(b)(1)(i)(A), (b)(1)(ii)(C), and (b)(5) and redesignating (b)(1)(ii)(D) 
and (b)(1)(ii)(E) as (b)(1)(ii)(E) and (b)(1)(ii)(F), respectively, and 
adding a new (b)(1)(ii)(D) to read as follows:

[[Page 5198]]

Sec.  158.37  Amendment of approved PFC.

* * * * *
    (b) * * *
    (1) * * *
    (i) * * *
    (A) Amend the approved PFC amount for a project by more than 25 
percent of the original approved amount if the amount was $1,000,000 or 
greater.
* * * * *
    (ii) * * *
    (C) To institute an increase of 25 percent or less of the original 
approved amount if the amount was more than $1,000,000;
    (D) To institute an increase of any amount if the original approved 
amount of the project was less than $1,000,000.
* * * * *
    (5) Justification, if the amendment involves a change in the PFC 
amount for a project by more than 25 percent of the original approved 
amount if that amount is $1,000,000 or greater, a change of the 
approved project scope, or any increase in the approved PFC level to be 
collected from each passenger;
* * * * *
    13. Amend Sec.  158.39 by revising paragraphs (a) and (d) to read 
as follows:


Sec.  158.39  Use of excess PFC revenue.

    (a) If the PFC revenue remitted to the public agency, plus interest 
earned thereon, exceeds allowable costs of the project, public agencies 
must use excess funds for approved projects or to retire outstanding 
PFC-financed bonds.
* * * * *
    (d) Within 30 days after the authority to impose a PFC has expired 
or been terminated, the public agency must present a plan to the 
appropriate FAA Airports office to begin using accumulated PFC revenue. 
The plan must include a timetable for submitting any necessary 
application under this part. If the public agency fails to submit such 
a plan, or if the plan is not acceptable to the Administrator, the 
Administrator may reduce Federal airport grant program apportioned 
funds.

Subpart C--Collection, Handling and Remittance of PFCs

    14. Amend Sec.  158.43 to revise paragraphs (b)(3) and (c) to read 
as follows:


Sec.  158.43  Public agency notification to collect PFCs.

* * * * *
    (b) * * *
    (3) The charge effective date will always be the first day of the 
month; however, it must be at least 30 days after the date the public 
agency notified the air carriers of the FAA's approval to impose the 
PFC.
* * * * *
    (c) The public agency must notify air carriers required to collect 
PFCs at its airport and the FAA of changes in the charge expiration 
date at least 30 days before the existing charge expiration date or new 
charge expiration date, whichever comes first. Each notified air 
carrier must notify its agents, including other issuing carriers, of 
such changes.
* * * * *
    15. Amend Sec.  158.45 by revising paragraph (a)(3) to read as 
follows:


Sec.  158.45  Collection of PFCs on tickets issued in the U.S.

    (a) * * *
    (3) Issuing carriers and their agents shall collect PFCs based on 
the itinerary at the time of issuance.
    (i) Any change in itinerary initiated by a passenger that requires 
an adjustment to the amount paid by the passenger is subject to 
collection or refund of the PFC as appropriate.
    (ii) Failure to travel on a nonrefundable or expired ticket is not 
a change in itinerary. If the ticket purchaser is not permitted any 
fare refund on the unused ticket, the ticket purchaser is not permitted 
a refund of any PFC associated with that ticket.
* * * * *
    16. Amend Sec.  158.47 by revising paragraphs (a) and (c)(3) to 
read as follows:


Sec.  158.47  Collection of PFCs on tickets issued outside the U.S.

    (a) For tickets issued outside the U.S., an air carrier or foreign 
air carrier may follow the requirements of either Sec.  158.45 or this 
section, unless the itinerary is for travel wholly within the U.S. Air 
carriers and foreign air carriers must comply with Sec.  158.45 where 
the itinerary is for travel wholly within the U.S. regardless of where 
the ticket is issued.
* * * * *
    (c) * * *
    (3) Issuing carriers and their agents shall collect PFCs based on 
the itinerary at the time of issuance.
    (i) Any change in itinerary initiated by a passenger that requires 
an adjustment to the amount paid by the passenger is subject to 
collection or refund of the PFC as appropriate.
    (ii) Failure to travel on a nonrefundable or expired ticket is not 
a change in itinerary. If the ticket purchaser is not permitted any 
fare refund on the unused ticket, the ticket purchaser is not permitted 
a refund of any PFC associated with that ticket.
* * * * *
    17. Amend Sec.  158.49 by revising paragraphs (b) and (c) and 
adding paragraph (d) to read as follows:


Sec.  158.49  Handling of PFCs.

* * * * *
    (b) Collecting carriers must account for PFC revenue separately. 
PFC revenue may be commingled with the air carrier's other sources of 
revenue except for covered air carriers discussed in paragraph (c) of 
this section. PFC revenues held by an air carrier or an agent of the 
air carrier after collection are held in trust for the beneficial 
interest of the public agency imposing the PFC. Such air carrier or 
agent holds neither legal nor equitable interest in the PFC revenues 
except for any handling fee or interest collected on unremitted 
proceeds as authorized in Sec.  158.53.
    (c)(1) A covered air carrier must segregate PFC revenue in a 
designated separate PFC account. Regardless of the amount of PFC 
revenue in the covered air carrier's account at the time the bankruptcy 
petition is filed, the covered air carrier must deposit into the 
separate PFC account an amount equal to the average monthly liability 
for PFCs collected under this section by such air carrier or any of its 
agents.
    (i) The covered air carrier is required to create one PFC account 
to cover all PFC revenue it collects. The designated PFC account is 
solely for PFC transactions and the covered air carrier must make all 
PFC transactions from that PFC account. The covered air carrier is not 
required to create separate PFC accounts for each airport where a PFC 
is imposed.
    (ii) The covered air carrier must transfer PFCs from its general 
accounts into the separate PFC account in an amount equal to the 
average monthly liability for PFCs as the ``PFC reserve.'' The PFC 
reserve must equal a one-month average of the sum of the total PFCs 
collected by the covered air carrier, net of any credits or handling 
fees allowed by law, during the past 12-month period of PFC collections 
immediately before entering bankruptcy.
    (iii) The minimum PFC reserve balance must never fall below the 
fixed amount defined in paragraph (c)(1)(ii) of this section.
    (iv) A covered air carrier may continue to deposit its PFCs into 
its general operating accounts combined with ticket sales revenue. 
However, at least once every business day, the covered air carrier must 
remove all PFC revenue (``Daily PFC amount'') from those accounts and 
transfer it to the new PFC account. An estimate based on

[[Page 5199]]

\1/30\ of the PFC reserve balance is permitted in substitution of the 
Daily PFC amount.
    (v) If the covered air carrier uses an estimate rather than the 
daily PFC amount, the covered air carrier shall reconcile the estimated 
amount with the actual amount of PFCs collected for the prior month 
(``Actual Monthly PFCs''). This reconciliation must take place no later 
than the 20th day of the month (or the next business day if the date is 
not a business day). In the event the actual monthly PFCs are greater 
than the aggregate estimated PFC amount, the covered air carrier will, 
within one business day of the reconciliation, deposit the difference 
into the PFC account. If the actual monthly PFCs are less than the 
aggregate estimated PFC amount, the covered air carrier will be 
entitled to a credit in the amount of the difference to be applied to 
the daily PFC amount due.
    (vi) The covered air carrier is permitted to recalculate and reset 
the PFC reserve and daily PFC amount on each successive anniversary 
date of its bankruptcy petition using the methodology described above.
    (2) If a covered air carrier or its agent fails to segregate PFC 
revenue in violation of paragraph (c) of this section, the trust fund 
status of such revenue shall not be defeated by an inability of any 
party to identify and trace the precise funds in the accounts of the 
air carrier.
    (3) A covered air carrier and its agents may not grant to any third 
party any security or other interest in PFC revenue.
    (4) A covered air carrier that fails to comply with any requirement 
of paragraph (c) of this section, or causes an eligible public agency 
to spend funds unnecessarily to recover or retain payment of PFC 
revenue, must compensate that public agency for those costs incurred to 
recover the PFCs owed.
    (5) The provisions of paragraph (b) of this section that allow the 
commingling of PFCs with other air carrier revenue do not apply to a 
covered air carrier.
    (d) All collecting air carriers must disclose the existence and 
amount of PFC funds regarded as trust funds in their financial 
statements.
    18. Revise Sec.  158.53 to read as follows:


Sec.  158.53  Collection compensation.

    (a) As compensation for collecting, handling, and remitting the PFC 
revenue, the collecting air carrier is entitled to:
    (1) $0.11 of each PFC collected.
    (2) Any interest or other investment return earned on PFC revenue 
between the time of collection and remittance to the public agency.
    (b) A covered air carrier that fails to designate a separate PFC 
account is prohibited from collecting interest on the account. Where a 
covered air carrier maintains a separate PFC account in compliance with 
Sec.  158.49(c), it will receive the interest on PFC accounts as 
described in paragraph (a)(2) of this section.
    (c)(1) Collecting air carriers may file collection cost data 
periodically to the FAA after the agency issues a notice in the Federal 
Register that specifies the information and deadline for filing the 
information. Submission of the information is voluntary. The requested 
information must include data on interest earned by the air carrier on 
PFC revenue and audited air carrier collection, handling, and 
remittance costs in the following categories:
    (i) Credit card fees;
    (ii) Audit fees;
    (iii) PFC disclosure fees;
    (iv) Reservations costs;
    (v) Passenger service costs;
    (vi) Revenue accounting, data entry, accounts payable, tax, and 
legal fees;
    (vii) Corporate property department costs;
    (viii) Training for reservations agents, ticket agents, and other 
departments;
    (ix) Ongoing carrier information systems costs;
    (x) Ongoing computer reservations systems costs; and
    (xi) Airline Reporting Corporation fees.
    (2) Any new compensation level determined by the FAA's analysis of 
data filed under paragraph (b)(1) of this section will replace the 
level identified in paragraph (a)(1) of this section.

Subpart D--Reporting, Recordkeeping and Audits

    19. Amend Sec.  158.63 by revising paragraphs (a) and (c) to read 
as follows:


Sec.  158.63  Reporting requirements: Public agency.

* * * * *
    (a) The public agency must provide quarterly reports to air 
carriers collecting PFCs for the public agency with a copy to the 
appropriate FAA Airports Office. The quarterly report must include:
    (1) Actual PFC revenue received from collecting air carriers, 
interest earned, and project expenditures for the quarter;
    (2) Cumulative actual PFC revenue received, interest earned, 
project expenditures, and the amount committed for use on currently 
approved projects, including the quarter;
    (3) The PFC level for each project; and
    (4) Each project's current schedule.
* * * * *
    (c) For medium or large hub airports, the public agency must 
provide to the FAA, by July 1 of each year, an estimate of PFC revenue 
to be collected for each airport in the following fiscal year.
    20. Revise Sec.  158.65 to read as follows:


Sec.  158.65  Reporting requirements: Collecting air carrier.

    (a) Each air carrier collecting PFCs for a public agency must file 
quarterly reports to the public agency unless otherwise agreed by the 
collecting air carrier and public agency, providing an accounting of 
funds collected and funds remitted.
    (1) Unless otherwise agreed by the collecting air carrier and 
public agency, reports must state:
    (i) The collecting air carrier and airport involved,
    (ii) The total PFC revenue collected,
    (iii) The total PFC revenue refunded to passengers,
    (iv) The collected revenue withheld for reimbursement of expenses 
under Sec.  158.53, and
    (v) The dates and amounts of each remittance for the quarter.
    (2) The report must be filed by the last day of the month following 
the calendar quarter or other period agreed by the collecting carrier 
and public agency for which funds were collected.
    (b) A covered air carrier must provide the FAA with:
    (1) A copy of its quarterly report by the established schedule 
under paragraph (a) of this section, and
    (2) A monthly PFC account statement delivered not later than the 
fifth day of the month. This monthly statement must include:
    (i) The balance in the account on the first day of the month;
    (ii) The total funds deposited during the month;
    (iii) The total funds dispersed during the month; and
    (iv) The closing balance in the account.
    21. Amend Sec.  158.67 by revising paragraph (c)(2) to read as 
follows:


Sec.  158.67  Recordkeeping and auditing: Public agency.

* * * * *
    (c) * * *
    (2) Conducted as part of an audit under Office of Management and 
Budget Circular A-133 (the Single Audit Act of 1984, Pub. L. 98-502, 
and the Single Audit Act Amendments of 1996, Pub. L. 104-156) provided 
the PFC is specifically addressed by the auditor.
* * * * *

[[Page 5200]]

Subpart E--Termination

    22. Revise Sec.  158.81 to read as follows:


Sec.  158.81  General.

    This subpart contains the procedures for terminating PFCs or loss 
of Federal airport grant funds for violations of this part or 49 U.S.C. 
40117. This subpart does not address the circumstances under which 
authority to collect PFCs may be terminated for violations of 49 U.S.C. 
47523 through 47528.


Sec.  158.97  [Removed]

    23. Remove Sec.  158.97.
    24. Amend appendix A by revising paragraphs 10 and 12 of section B 
to read as follows:

Appendix A to Part 158--Assurances

* * * * *
    B. * * *
* * * * *
    10. Recordkeeping and Audit. It will maintain an accounting record 
for audit purposes for 3 years after physical and financial completion 
of the project. All records must satisfy the requirements of 14 CFR 
part 158 and contain documentary evidence for all items of project 
costs.
* * * * *
    12. Compliance with 49 U.S.C. 47523 through 47528. It understands 
49 U.S.C. 47524 and 47526 require the authority to impose a PFC be 
terminated if the Administrator determines the public agency has failed 
to comply with those sections of the United States Code or with the 
implementing regulations published under the Code.

    Issued in Washington, DC, on January 26, 2006.
Dennis E. Roberts,
Director, Office of Airport Planning and Programming.
[FR Doc. 06-896 Filed 1-31-06; 8:45 am]
BILLING CODE 4910-13-P


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