G:\APP002\PFC-Related Issues to be Considered During Airport Privatization.docx 

PFC-Related Issues to be Considered During Airport Privatization 

Revised August 17, 2012 

1. New or amended PFC collection authority. A private entity that is approved to function as an airport 

sponsor (hereafter “the sponsor”) under the Pilot Privatization Program may be eligible to impose and 

use PFCs for PFC-eligible projects, consistent with the statutory and regulatory provisions applicable 

to other public agencies. All of the same rules apply. By law, PFC revenues must be for projects that 

preserve or enhance capacity, safety, or security; reduce noise; or enhance competition. The FAA 

may approve PFCs to make reasonable payments for market-based debt service on bonds issued to 

construct an eligible, approved project. 

2. Use of PFCs to retire or convert public (tax-exempt) bonds. 

a. Existing PFC-Backed Bonds. If the airport has existing debts backed by PFC revenues (whether 

pledged or merely committed), then the sponsor may request a PFC amendment to increase the 

collection authority in order to pay a slightly higher coupon rate on private (taxable) debt required 

to replace public (tax-exempt) bonds. However, the FAA must be able to make a determination 

on the reasonableness of any such action. Before approving such an amendment, by law the FAA 

would have to be able to make a determination that the cost is reasonable. The new debt structure 

would have to be competitive in nature (i.e., with the debt instruments publicly marketed to 

secure the most favorable rates possible), and the FAA would consider the historical difference in 

coupon rates between public (tax-exempt) and private (taxable) debt as part of this determination, 

as well as other considerations such as maturity period, amortization schedules and other criteria. 

Any such amendments would require airline consultation because it would represent a change in 

the method of financing the project. It would be imperative that the specific terms of such 

changes in debt structure be clearly presented to the airlines in the notice of consultation as well 

as in the actual amendment request. 

The sponsor would also have to submit sufficiently detailed requests for PFC amendments to 

clearly show which the PFC-eligible projects in which applications would be affected by the 

proposed changes. 

b. Other Existing Bonds. If the airport has other existing debts that have not been backed by PFCs, 

for PFC-eligible projects, then the sponsor would have to file new PFC application(s) in 

accordance with the normal requirements for PFC applications. Again, the FAA would have to 

be able to make a determination on the reasonableness of the costs, including the financing costs. 

c. Amendments requiring consultation. Any amendments to existing applications would require 

airline consultation, in accordance with FAA Order 5500.1, Chapter 12, Section 12-6(c), because 

it would represent a change in the method of financing the project. 

3. Notices and timelines. The sponsor is urged to review all of the requirements for PFC applications 

and amendments, set forth in FAA Order 5500.1. The FAA highlights the following as a courtesy: 

a. Airline notice and consultation. The sponsor would have to provide at least 30 days advance 

notice to the airlines of the scheduled consultation, copying the FAA. The notice must contain 

sufficient detailed information regarding the proposed application(s) and/or amendment(s), 

including a clear disclosure of the net change in collection authority and a clear disclosure of 

what portion of the change is directly attributable to the proposed privatization. It is not 

sufficient to simply state that the principal amount is unchanged—there must be a clear disclosure 

of the change in financing costs. 

Due to the anticipated complexity, the FAA strongly encourages the sponsor to allow the FAA to 

review a draft of the airline notice and public notice. The sponsor would then have to submit the 

PFC application(s) and/or amendment(s) within six (6) months of the consultation, but no sooner 

than 30 days after airline consultation. 
G:\APP002\PFC-Related Issues to be Considered During Airport Privatization.docx 

b. Public notice. Same as for the airline consultation. 

c. FAA review time. For any new PFC application(s), the FAA has 120 days from the date a final, 

complete application is submitted before issuing a decision. Due to the complexities involved 

with retiring and/or converting debt, these actions will not be delegated to the Region. 

Amendments can normally be faster but in this context they may require extensive review.