The United States has approximately 500 airports served by scheduled airlines. Airports have long served as places for planes to take off and land, consisting of runways, control towers, terminals and other facilities that directly served airlines’ passengers and cargo. Airlines play a key role in the functioning of airport systems because they make decisions about which airports to serve and how frequently to provide service. Airlines may consider a number of factors in making these decisions, such as the presence of regional businesses and residents who are potential customers, the market share that can be obtained, the effects on their service network, and the service provided by competing carriers. Over the last three decades some airports began providing a greater range of passenger and business services and increasing their concessions to increase their revenue stream. Airport operators began to view airports as a destination as well as a place from which to take off and land. By the early 2000s, many airports focused on upscale concessions, such as exclusive restaurants and designer boutiques, and other premium services, such as rental car facilities and parking facilities linked to the airport, to help maximize revenue generation. John Kasarda, an airport and development expert, along with other researchers, noted these changes occurring at airports, both nationally and internationally, and began researching commercial development on airport property—referred to as the airport city—more than 15 years ago. According to Kasarda and other researchers, development on the airport spills over to the surrounding region and results in a new urban growth form with the airport at its center. (See app. IV for a selected bibliography.) According to Kasarda, this new urban growth form, for which he coined the phrase, “aerotropolis,” is similar to the growth of the traditional metropolis, in which the central city is linked to the suburbs through a surface transportation system. Studies on growth around airports have found that businesses that require or benefit from air transport seek locations near the airport, extending as far as 20 miles. Regional corporate headquarters, information and communications technology complexes, retail, hotel and entertainment centers, manufacturing facilities, trade representative offices, big-box retail stores, health, wellness, and fitness centers, conference centers, and residential developments, for example, are increasingly being established near airports as a part of airport-centric development. Researchers have noted that plans for such development involve arrangements for targeted development to facilitate the efficient flow of surface traffic, attract complementary businesses, and mitigate environmental contaminants usually associated with airports to increase the speed at which airport-centric development occurs. Researchers have also noted that the benefits from the development on the airport property reach far beyond the airport into the surrounding region, which can, in turn, reciprocally benefit the airport. Globally, aviation and airport systems vary and, in practice, the approaches to airport-centric development have varied. In several European countries and in the United States, airports were established decades ago and commercial development around most of those airports evolved in a piecemeal or ad-hoc way, without centralized planning or the cooperative efforts of airport operators, local and regional planners, and business developers. In the United States, the last large airports serving scheduled airlines that have been newly constructed on previously undeveloped land were the Denver (1995) and Dallas/Fort Worth (1974) International Airports. Operators at airports like Hong Kong and Incheon in South Korea are beginning to incorporate elements of commercial development at their airports and some operators have introduced policies or incentives to encourage targeted airport-dependent land use and development at and around the airports. In countries in which the aviation and airport systems are much newer, such as China and the United Arab Emirates, officials are employing a centralized planning and cooperative approach to rapidly expand commercial development on and around airports. Airport operators at domestic airports with scheduled airline service rely on revenue from two types of activities: aeronautical and nonaeronautical. Aeronautical activities at an airport occur on the airfield or in the terminal areas where airlines operate. For purposes of this report, revenue generated from aeronautical activities includes fees airports charge airlines to operate within the airport and other fees paid or collected by aircraft operators, including Passenger Facility Charges (PFCs), and Airport Improvement Program (AIP) grants. The Passenger Facility Charge (PFC) was introduced in 1990, Omnibus Reconciliation Act of 1990. Pub.L. No. 101-508, § 9110, 104 Stat. 1388, codified as amended at 49 U.S.C. § 40117. financed through taxes on aviation fuel and passenger airline tickets. Airports may also receive capital funds through state and local sources in addition to federal funds. Airport operators may also borrow the funds needed to finance capital projects through municipal bond markets. Airport revenue, including PFCs, may be used to pay debt service on bonds issued for eligible projects. Because funds from bonds are issued based on projected airport revenue, they are not considered by FAA to be a separate source of airport revenue. Nonaeronautical activities include food and beverage, retail concessions, and parking, automobile rentals, and rent on land and non-terminal facilities, such as manufacturing, warehousing, and freight forwarding. Nonaeronautical revenue may be used to reduce payments by airlines and may also be used to maintain and improve commercial services. (See fig. 2.) At some airports, terminals used by specific airlines are also financed and built through agreements between the airlines and the airports. Some airport operators are pursuing public-private partnerships (P3s) to finance their commercial development efforts, outside of their financial agreements with airlines. P3s are negotiated contractual agreements between public entities, such as an airport, and a private entity such as a contractor or developer. P3 contractual arrangements can allow developers to build and operate a facility and then transfer the facility to the airport, although there are various types of P3 arrangements. Under one of these types of arrangements, the private developer provides all or part of the financing and intends to capture its development or management fees. This type of P3 arrangement can provide the airport with the most leverage for commercial development. Based on our research, we found that officials from airports and jurisdictions considered the following factors when pursuing airport-centric development: (1) development at the airport, (2) air and surface connectivity, (3) funding sources for development, (4) development in the region, and (5) collaboration among stakeholders. (See fig. 3.) “Development at the airport” refers to existing infrastructure already in place and the actions of airport operators to enhance the viability of their airport by focusing on commercial activities to increase airports’ aeronautical and nonaeronautical revenue. “Air and surface connectivity” includes the routes taken by passengers or cargo to and from the airport to and from other destinations that may be enhanced by highway, rail, and port construction and additional airline routes. “Funding sources for development” include the funding for airport- centric developments as well as airport operations. “Development in the region” involves leveraging existing regional assets, expanding existing assets, or attracting new employment opportunities and business activity. “Collaboration among stakeholders” refers to the various actions that stakeholders can take to reach the goals and objectives that may further airport-centric development. An airport’s ability to generate revenue and contribute to the regional economy depends on its ability to attract airline service, passengers, and cargo shipments. Airport operators’ development efforts occur on airport property and involve: (1) providing services that directly support airline operations; (2) providing an expanded number and type of services within the airport terminals for passengers and visitors from the region; and (3) developing services for passengers and businesses, including airlines, on airport property but outside of the terminal areas. Officials at most of the airports in our review believed that their ability to attract and retain airlines was necessary to spur airport development. In particular, airline operators pay for their use of airport services ranging from the use of runways and cargo facilities, to the use of gates and ticket counters. Revenue from airlines for these services constitutes an important component of total airport revenue. In an effort to attract airlines and generate additional revenue, most airport operators we interviewed are expanding the number and type of services they offer, and some offer financial incentives. For example, some airport operators have begun offering services such as catering, maintenance, and warehousing that airlines or other third parties previously provided. Miami International Airport officials said that they waive landing fees for international and low cost carriers for the first 2 years in which the airlines schedule flights to Miami—forgoing some current airport operational revenue to help increase future airline operations while capturing more nonaeronautical revenue. As airport operators seek to attract revenue from passengers and visitors, they are renovating their terminals or improving their physical designs to improve the flow of people to the shops, concessions, and gates. The operators are also increasing the number and quality of retail and services—such as wine bars, massage spas, health care clinics, and high fashion shops—offered to passengers and, in some cases, visitors from the local area. (See fig. 4.) For example, the Miami International Airport was named one of the top 10 U.S. airports for dining and one of the world’s top 10 airports for retail shopping. The new $1.7 billion Tom Bradley International Terminal at Los Angeles International Airport is to contain 140,000 square feet for premier dining, retail shopping, and airline club lounges. Also, the Atlanta City Council approved a $3-billion concession contract for 126 food and beverage locations at 24 retail locations at the Hartsfield-Jackson Atlanta International Airport. Airport officials we spoke with in Miami and Los Angeles International Airports have cited the importance of passengers who arrive at or depart from their airports for the regional economy rather than those passengers connecting to other flights. Tourism is an important draw to each of these regions, and airport officials have improved airport facilities to more efficiently process and admit international visitors and tourists through security and immigration and customs checkpoints. Airport officials at these airports said that Customs and Border Protection (CBP) staffing can be insufficient at peak travel times and were concerned that international travelers might avoid their airports because of screening delays. These officials also believe that improvements to their airports could increase the rate of passenger and cargo processing if a sufficient number of CBP agents were available to staff inspection booths at peak travel times. However, many U.S. airports lack the space to expand their security facilities, and therefore, may need to identify innovative approaches to overcoming screening delays. Many airport operators are also developing airport property outside the terminal area to attract businesses and to use available land to generate revenue. Some have organized their management structures to include development or real estate offices to coordinate with airport management, developers, and public agencies. They are establishing commercial services and activities, such as hotels, parking facilities, and logistics parks, or leasing land for short-and medium-term use until it is needed in the future. Most airport officials we spoke with said that the amount of available land on the airport property was a factor in their ability to attract commercial activities to the airport. Officials varied in the type and extent of commercial activities or land uses they were pursuing. Airport officials from Hartsfield-Jackson Atlanta International Airport, Baltimore/Washington International Thurgood Marshall Airport, Los Angeles International Airport, and Miami International Airport said that the amount of land they had available limited their development options on airport property. According to officials in Miami, state law enabled the Florida Department of Transportation and airport officials to obtain land adjacent to the airport property for the development of an intermodal transportation center. This center contains the rental car facility and connections to the Metrorail and TriRail commuter rail systems that service Miami and nearby cities. Airport officials at Indianapolis International Airport partnered with a community college to develop a worker-training program in logistics and distribution at the airport to meet an anticipated growing need for this skill. Officials at Lambert-St. Louis International Airport would like to develop cargo services, including warehouses and cold storage facilities, to attract cargo operations that could generate revenue at the airport. Their goal is to use cargo revenue to lower the cost of passenger flights in an attempt to increase passenger traffic. In addition, airports with land not being used for operation have found ways to generate revenue through temporary or short-term leases of airport property while also reserving the land for future aeronautical needs. We found that Indianapolis and Denver International Airports plan to develop solar energy farms on airport property; Denver International Airport produces more solar energy than any other airport with scheduled airline service in the United States. Officials at Dallas/Fort Worth International Airport have leased a portion of the airport property for oil extraction. See figure 5 for examples of such airport land use and development. In two localities, airport and regional officials indicated that activities in the region were contributing to the commercial viability of the airport. Regional officials told us that, in part, because of the U.S. automotive industry’s presence in Detroit, several of the leading Asian automobile manufacturers have established research and development facilities in the Detroit metropolitan area. In addition, these officials said that a vibrant Asian community, the availability of highly skilled engineering workforce, and access to institutions of higher education offering degrees relevant to their careers attracted Asian automobile industry researchers. According to regional officials, these activities have increased the traffic at Detroit Metropolitan Wayne County Airport. Officials from Miami International Airport and the region discussed the symbiotic relationship between Miami International Airport and the Port of Miami. According to an official, the Port of Miami is the busiest cruise port in the world with over 4 million passengers annually. Of these passengers, 60 percent arrived in Miami through Miami International Airport. The construction of rail connections between the port, downtown area, and airport is expected to facilitate connectivity. These officials noted that the expansion of the Panama Canal to accommodate larger ships in 2014 will benefit Miami because large ships can use the Port of Miami and is to help to promote trade with Asia. If this expected growth in cargo operations occurs, then, according to port officials, the Miami region will benefit and, in turn, contribute to the growth of Miami International Airport by expanding its potential passenger and cargo markets. Most stakeholders we spoke with believe that a region’s ability to connect to a variety of domestic and international locations by air is key to attracting businesses, tourists, and cargo to the region. Airport and regional officials sought to increase the number and frequency of flights to a variety of locations by establishing new relationships with foreign airports and business groups and offering incentives to airlines for additional destinations by the airlines. For example, airport and regional officials in Atlanta and Paris have begun cooperating on ways to promote their airport areas for business exchanges. Similarly, Miami International Airport officials visited and reciprocally hosted South African business groups to encourage business development and the flow of passengers and cargo between their respective regions. In July 2012, airport operators at the Memphis International Airport began a $1 million incentive program to attract new, non-stop domestic and international routes. Despite efforts by airports to maintain good air connectivity to many locations, it is airlines that make decisions about what routes to fly. Most airport officials noted that the airlines’ decisions to change or eliminate routes can sometimes negatively affect the region’s level of air connectivity. In recent years, the General Mitchell International Airport in Milwaukee experienced a period of growth followed by a decline because of airline business decisions. According to the airport operator, the presence of three low-cost carriers increased the number of flight offerings, but the subsequent merger of two of those airlines and relocation of the third resulted in fewer flights. Similarly, officials in Memphis were concerned about potential loss of air services after a major airline announced plans to decrease its passenger services at Memphis International Airport in response to low demand making the route uneconomical for the airline. Among our selection of airports, international connectivity varied. For example, as of February 2013, 33 airlines served Dulles International Airport, offering direct flights to more than 40 destinations in Canada, Mexico, the Caribbean, and parts of Europe, South America, Asia, Africa, and the Middle East. By comparison, direct flights from General Mitchell International Airport in Milwaukee were limited to destinations in the United States, Mexico, and the Caribbean. Because cargo may be transported below the passenger decks of airplanes, a decline in international passenger flight offerings may affect a region’s potential to directly provide cargo access to international markets for those businesses that rely on air services. In addition to air connectivity, officials we spoke with discussed the need to improve the connectivity of their surface transportation system to attract businesses, especially those that handle time-sensitive or high- value goods such as perishable items or electronic components. These officials cited the importance of identifying and marketing the various transportation modes of a particular region. For example, as mentioned, officials at the Port of Miami estimated that 60 percent of its cruise ship passengers arrive by air. This, they said, highlights the importance of an efficient connection between the airport and the seaport for moving tourists to and from cruise ships. Miami International Airport officials also highlighted the importance of an airport to highway connections for importing and distributing perishable items, including flowers and produce, from Latin America. They noted that many trucks transport cargo from the airport to the federal highway system daily, helping to distribute perishable food and produce imports to the United States. These officials also said that a viaduct dedicated to truck traffic was being built to stem a projected loss of $1 billion in revenue by 2015 because of congestion on the roads between the cargo area inside the airport and the warehouses and freight forwarders in the nearby city of Doral. At Indianapolis International Airport, officials cited the region’s rail and highway connectivity and the presence of FedEx facilities as important infrastructure to support a growing logistics, freight-forwarding, and distribution industry. Airport officials and other regional stakeholders in Memphis market its “Four Rs”—road, river, rail, and runway—to appeal to businesses that may rely on intermodal transportation. Figure 6 illustrates intermodal transportation systems and surface transportation connectivity. With access to multiple modes of transport, businesses can determine shipping routes and methods that are cost-effective and meet customer requirements. (See table 1 for examples of multimodal transportation at airports.) FedEx, for example, determines which mode is the most cost effective based on fuel prices, distance traveled, and time of travel and selects the mode to use. Stakeholders in the Memphis region also noted that the airport’s geographic location provides companies with timely access to major U.S. markets and many places around the world. According to a FedEx official, their ability to reach two-thirds of the U.S. population within 12 hours and most international locations overnight was a key factor in locating in Memphis. Many stakeholders told us that a region cannot fully benefit from an efficiently run airport if the surface transportation needed to access the airport is congested. Surface congestion can increase costs, contribute to system inefficiencies, and delay on-time freight delivery. These stakeholders also considered ways to increase public transportation options to relieve congestion from roads while providing alternate transportation options to travelers and airport workers. Most regions in our review offer local bus services to their airports and many also offer local rail services, or plan to offer new rail connections between the airport and the central business district, downtown, for example, in Miami, Washington, D.C., Los Angeles, and Denver. Alternatively, a well- integrated surface transportation network can provide the basis for an efficient logistics and distribution services within a region. Many experts we spoke to agreed that intermodal networks consisting of highways, rail capabilities, or waterways, linked to the airport may facilitate airport- centric development by improving mobility and allowing more people and cargo to access the airport. Some experts we spoke with, as well as literature sources,advancements in high speed rail and the potential for code sharing across modes of transportation as a way to free up additional capacity at the airport in some congested regions of the country and extend the region served by an airport. Under a code sharing arrangement, integrated air- rail ticketing would allow a passenger to use both modes of travel through one purchase transaction. Some experts believe that high speed rail development could help contribute to the commercial development of airports. California is considering options as it develops its high-speed rail capabilities, with one potential plan to link San Diego through Los Angeles to Sacramento and San Francisco and airport officials in Miami told us that they believed a high speed rail link between Miami and Orlando would increase the number of passengers at Miami International Airport. Other experts, however, believe that high-speed rail could divert demand from air transport and reduce the need for commercial development at airports, especially if high speed rail is not directly linked to airports. Currently, roads and light rail affect airport development more than high speed rail. Transportation improvements for airport-centric development may entail large capital-intensive projects that generally require pooling money from different sources. Federal funds are often sought, but airport and regional officials also seek other sources of funds for their development efforts, particularly intermodal funding and public-private partnership funding. The failure to obtain adequate funding can prevent or inhibit the growth of these airport-centric projects. Officials from the City and County of St. Louis and the State of Missouri were unable to obtain the funding they needed for airport-centric development after airport and the private sector representatives formed the Midwest-China Hub Commission in 2008. After establishing a freight and commercial logistics facility at the airport, the commission sought to attract regularly scheduled freight service to Asia and Latin America and obtain foreign direct investment. Members of the commission visited China, established an office in Beijing, and hosted visitors from China. A Chinese cargo airline began scheduled flights to St. Louis in 2011; however, its operations were not sustainable without financial assistance, according to airport officials at Lambert-St. Louis International Airport. Stakeholders sought to obtain $480 million in state funding to: (1) subsidize the cost of initially flying goods out of the St. Louis region to China (2) provide tax breaks to companies engaging in foreign trade at the airport, and (3) subsidize the cost of constructing millions of square feet of warehouse and factory space in locations across the region. The commission was unable to obtain state funding and is delaying their airport-centric development efforts while it seeks funding from other sources. According to an April, 2011, evaluation of the Global TransPark logistics the TransPark received airport-centric effort in Kinston, North Carolina,a total of $248 million in funding from local, state, federal, and private sources—far short of the estimated $733 million total cost of the complex. Evaluators found that the TransPark Authority was unable to repay a $25 million loan that had been made in 1993, because operations at the TransPark did not generate sufficient funds to repay the loan. The balance of the loan—$39.9 million because of interest accrual as of February 2011—is to be repaid by the state of North Carolina. One expert attributed the Global TransPark’s failure to attract sufficient business activities to recover costs in a timely manner to an original project design that was too optimistic and the financial risks surrounding large-scale projects. As shown in table 2, the federal government has a number of programs designed to support regional transportation infrastructure development, which some regions have leveraged as part of their airport-centric development efforts. Although federal sources of funding—such as those identified above— can sometimes be used to develop intermodal capabilities at U.S. airports, the primary planning and development responsibilities for these efforts rest with state and local government agencies. State and locally generated money—such as state transportation trust funds, dedicated sales taxes, and highway tolls—have been used to match federal funds. For example, contributions from the Commonwealth of Virginia, the Metropolitan Washington Airports Authority, Fairfax and Loudoun Counties, and toll revenues from the Dulles Toll Road will be used to pay for the Washington Metropolitan Area Transit Authority Metrorail connection to Dulles International Airport. A “transportation improvement district” was also established to help fund the Metrorail extension from downtown Washington, D.C. to the airport. States may also have their own credit assistance programs. For example, Florida used funds from its credit assistance bank to provide loans to help develop the Miami Intermodal Center at the Miami International Airport. The Miami Intermodal Center has levied a customer facility charge on car rentals to pay for its consolidated rental car facility. Some airport operators and an expert with whom we spoke said that FAA’s grant assurances and obligations—that is, requirements on the use of federally administered funds—can limit the airport operator’s ability to fund certain types of intermodal projects. For example, airport operators may use PFCs or AIP grants to fund rail access at airports, if the project is owned by the airport, located on airport property, and used exclusively by airport passengers and employees. PFCs may be used to fund related activities when they are a necessary part of an eligible access road or facility. This requirement on the use of PFCs exists to avoid revenue diversion-the use of airport revenue for other than airport purposes. According to an expert we spoke with, the failure to meet these conditions may preclude an airport from using such funding to connect with a transit line that connects communities on each side to the airport because FAA would require that riders on the transit line begin or end their journey at the airport, rather than bypassing the airport. There are also federal restrictions on the development and sale of airport- owned land and the use of revenues generated from an airport’s land because of the grant assurances an airport accepts as a condition of receiving federal land or funds. Other funding sources on which airport operators generally rely to improve or commercially develop their airports, such as state grants and bonds, also involve various assurances. A public-private partnership (P3) for airport-centric development usually refers to a contractual agreement formed between a public airport and private sector developers for the developers to renovate or construct and operate or manage an airport’s facilities on airport land. Some airport operators view public-private partnership arrangements to commercially develop airports as an alternative or supplementary funding source to funds that may be limited by federal restrictions or grant assurances. The particular arrangements of public-private partnerships vary considerably, but developers may finance, design, build, operate, and maintain an enterprise (including charging fees) for a specific time period, after which ownership of the enterprise reverts back to the airport in most P3 arrangements. The Port Authority of New York and New Jersey partnered with the private sector for the $1.2-billion expansion of Terminal 4 at John F. Kennedy International Airport, which when it opened in 2001, represented the largest P3 of its kind at a North American airport. In October 2012, the Port Authority issued a request for qualifications for a P3 to replace LaGuardia’s main terminal in addition to new roads and taxiways with anticipated construction beginning in 2014. debt already incurred to renovate the airport’s terminals. We have previously reported on the benefits and trade-offs of P3s and have expressed concern about how the public interest is protected in these projects. The most recent surface transportation reauthorization, MAP- 21, requires the Secretary of Transportation to develop standardized P3 agreements, identify best practices, and provide technical assistance to P3 project sponsors. Denver International Airport illustrates another possible type of public- private funding, although a type that is likely to be of limited use to most U.S. airports. Denver International Airport, as part of the Denver Department of Aviation, receives funds from the sale and development of Denver’s previous airport, Stapleton. This land is being zoned as mixed- use and being developed primarily as residential communities. To develop the Stapleton site, a private non-profit corporation established by the city of Denver and the Denver Urban Renewal Authority, had to re- grade the site to provide adequate storm water drainage; install water, sewer, and other utility lines; develop roads and interchanges; plan and develop parks and trails; preserve wetlands; and install community facilities, such as fire stations, a recreation center, a branch library, and schools. Most local government and private sector officials with whom we spoke promoted their region’s existing assets and proximity to the airport to attract or expand businesses that benefit from air connectivity. Officials identified a variety of mechanisms to attract businesses, such as (1) linking airport development to commercial activities in the region, (2) identifying and leveraging unique cultural aspects of the region and promoting tourism or the general quality of life offered by the area, (3) developing industry clusters,incentives to attract businesses to the region. and (4) designing policies and providing Local government officials at many localities indicated that activities on airport grounds contributed to development in the region around the airport. Officials at Hartsfield-Jackson Atlanta International Airport told us that based on a 2009 economic impact study of the airport; they expected a new international terminal to increase airport operations and attract businesses and create jobs in the region surrounding the airport. These airport officials noted that regional stakeholders have already established two new hotels, an office building, and the Georgia International Convention Center on property near the airport. The Mayor of Denver has said that development at the Denver International Airport has the potential to spur commercial development in the Denver region for decades, including development along a planned commuter rail corridor that connects the airport with downtown Denver. The Regional Transportation DistrictAirport; airport officials are planning to build the terminal station and, in conjunction with the city of Denver, one or two additional stations to encourage development in the resulting corridor between the city of Denver and the airport. is building electrified commuter rail to Denver International Cargo service airports can also contribute to regional development. For example, Alliance Global Logistics Hub, an industrial cargo airport near Dallas/Fort Worth International Airport, developed in 1982, has attracted more than $7 billion in investments and 290 corporate residents, including 50 companies listed on the Fortune 500, Global 500 or Forbes’ Top List of Private Firms. Although the North Carolina Global TransPark in Kinston, North Carolina, has not attracted the initial investment or new jobs initially envisioned, some development has taken place. The TransPark has, as of February 2013, attracted 13 tenants. One of the tenants received a Job Development Incentive Grant from the North Carolina Department of Commerce, and is expected to employ more than 1,000 workers by 2014. An official representing the TransPark said that new developments like the TransPark take time to fully install supporting transportation infrastructure and utilities to attract tenants, but hopes that additional companies will locate at the TransPark. Officials at Los Angeles and Miami International Airports cited cultural ties to other regions of the world and tourism as important drivers of passengers and cargo traffic. For example, airport officials in Los Angeles said that the city has large Korean and Iranian populations, and Miami airport officials spoke of the city’s close cultural ties with Latin America. Officials in Los Angeles said that the large population of Asians in the Los Angeles region has reinforced strong cultural ties to Asian countries and has helped to support trade with these countries. Similarly, officials in Miami said that tourists from Latin America and the Caribbean visit Miami, in part, because of the cultural familiarity, the access to world-class tourist attractions and cruise ships, and the shopping options that may be unavailable in their countries of origin. In both locations, the regional aspects helped to attract visitors who use the airport and spend money in the region. Officials in Memphis said that some of their development efforts, such as developing Elvis Presley Boulevard and the potential redevelopment of downtown Memphis, are intended to increase tourism and attract more passenger flights to the area. They also noted that by drawing visitors to the region, the airport would generate additional revenue and airlines might offer more flights to the region. In some regions, local officials told us that they were trying to attract complementary businesses to form industry clusters that might benefit from the availability of a skilled and interchangeable, or transferrable, workforce. For example, officials in Miami have been fostering growth in the region’s banking, insurance and legal services, by promoting its multicultural and multilingual workforce and its direct air connectivity to Latin America and the Caribbean. Stakeholders involved with business development in the Baltimore region expected that the influx of military jobs at Fort Meade would result in the growth of defense contracting jobs in the region. These officials anticipate that defense contracting jobs will, in turn, lead to additional growth in the region. For example, one regional stakeholder noted that the growing number of government consultants rely heavily on air transportation and area hotels. Executives at a private corporation in Detroit told us that they are trying to attract compatible businesses that could leverage the region’s strength in research and development in automobile electronics. Most local officials we spoke with have implemented state, regional, or local tax-based incentives and land use policies to attract businesses and developers to their regions. For example, airport officials in Indiana, Maryland, Missouri, North Carolina, Texas, and Virginia have applied to the U.S. Department of Commerce for foreign trade zone designation at and around their airports to support tax-free manufacturing. Stakeholders in Detroit leveraged state-approved tax incentives to attract businesses that rely on the airport for commerce to a 60,000 acre area around the Detroit Metropolitan Wayne County and Willow Run Airports. Local planning officials have affected particular land uses near airports through planning policies, including policies related to noise, environmental quality (air, water, wetland, species protection), and zoning restrictions. This can help with airport-centric development because it prioritizes limited developable land for uses that are compatible with airport operations and compliant with local, state, and federal requirements. At the Hartsfield- Jackson Atlanta International Airport, a private developer cleaned up an abandoned industrial site east of the airport and sold a portion of the land to the City of Atlanta for the airport’s use and sold another portion to a high-end auto manufacturer. The auto manufacturer expressed interest in purchasing more land from the developer to attract another high-end auto manufacturer to develop and share a track on the site to attract prospective buyers to fly into the region to test drive cars. Airport officials in three of the regions in our study said they have considered the potential to utilize one airport primarily for passengers with a nearby airport for cargo; however, those officials also identified potential challenges to splitting passenger and cargo operations. For example, officials from Los Angeles International Airport told us that it would be inefficient to move their cargo operations to nearby Ontario Airport in the Los Angeles region because much of the cargo passing through their airport travels in the lower deck of passenger planes. Officials at Detroit Metropolitan Wayne County Airport said they use nearby Willow Run industrial airport for air cargo to complement passenger and cargo services offered at Detroit Metropolitan Wayne County Airport, but cited limitations in the airport’s runway length and condition. An official at Alliance Global Logistics Hub, on the other hand, said that the passenger services offered at nearby Dallas/Fort Worth International Airport complemented the cargo-only services offered at Alliance Global Logistics Hub because Dallas/Fort Worth International Airport offers passenger services most major cities in the United States, Mexico and Canada within 4 hours. While the economic viability of all-cargo operations at Ontario and Willow Run Airports is not yet known, we have previously identified regional airport planning as one approach to constrained capacity. Some metropolitan planning organizations (MPO) conduct regional airport planning as a part of their activities. In 2010, we found metropolitan- planning organizations that conduct regional airport planning have no authority to determine the priorities of airport improvement projects in their regions; MPOs do have authority over surface transportation projects. As a result, the regional airport plans that MPOs produce have little direct influence over airport capital investment and other decisions.Support and funding of regional airports depend on the FAA’s assessment of the project. Thus, GAO recommended that FAA develop a review process for regional airport system planning. According to FAA officials, FAA agreed to review its Airport System Planning guidance and revise or clarify it, if necessary, although the agency believed it current guidance was adequate. Airport-centric development efforts in the regions we studied span multiple jurisdictions and involve stakeholders from the airport, the private sector, and the government sector. Based on our review of literature, our previous work,visited, collaboration among various stakeholders can help achieve specific goals. Consultation with residents near the airport and with city officials representing the interest of their constituents is an important step in the airport-centric development process. Without collaboration or agreement among stakeholders, development plans may be difficult to implement. Los Angeles International Airport officials, for example, would like to further expand the airport’s northern airfield to address safety and efficiency issues related to aircraft operations (including accommodating and discussions with stakeholders in the regions we larger aircraft); however, given the proximity of the airport to residential areas and community opposition to potential noise issues, there has been little public or political support for the airport’s expansion. As our previous work has shown early and continuous community involvement is critical to efficient and timely project implementation. For example, some airport operators are using AIP funds for long-term environmental planning; continuously self-monitoring their environmental footprints to help prepare for and address environmental issues; and soliciting community concerns to anticipate and address environmental issues. In addition, several FAA processes have been established to help airports address environmental concerns such as a streamlined environmental review process for airport projects where expansion is critical for handling the growth of air traffic. In the future, as airports like Los Angeles International Airport learn to better manage their environmental impacts, airports may be better able to garner community support for airport expansion. The stakeholders we spoke with gave examples of the ways in which they collaborated with other stakeholders, such as establishing new groups to promote airport-centric development. Regional stakeholders in Baltimore, Detroit, Indianapolis, Memphis, Milwaukee, and St. Louis formed multilateral committees including stakeholders representing the airport, the public sector, and the private sector. While these committees all had a general focus on airport-centric development, they focused on different aspects of airport-centric development and functioned in different ways, for example: The BWI Partnership is a business-development advocacy group, representing the airport and approximately 200 developers, hotels, law firms, banks, and local government members, and focused on supporting business development and efficient transportation in the airport region. The Detroit Region Aerotropolis Development Corporation (ADC) is a public-private economic development agency that works to attract businesses that rely on air cargo and passenger services. It is comprised of and funded by stakeholders representing seven local communities, two counties, and the airport. The Next Michigan Development Act,jurisdictional cooperation among local entities and allows them to create tax incentive zones targeted at businesses in the transportation and logistics sectors. According to the ADC the act contains a clause to prevent job displacement from another region of the State of Michigan. a state incentive program, encourages inter- Airport officials led airport-centric development efforts at and around the Indianapolis International Airport. In their early planning stages, airport officials invited representatives from nine neighboring jurisdictions, including the City of Indianapolis, to sign a nonbinding memorandum of understanding to explore potential targeted airport- centric development opportunities, based on land availability and existing assets and infrastructure, such as warehouses, and rail connections that might be utilized to support airport-centric development; the officials increased the number of stakeholders with whom to collaborate by expanding the area of consideration, from a 5- mile radius to an 8-mile radius; and they began monthly stakeholder meetings. Airport officials also partnered with a local community college to establish a supply-chain logistics and freight-forwarding technical school on airport property to meet the anticipated demand for skilled workers in this trade. In 2006, the Greater Memphis Chambers of Commerce created the Memphis Aerotropolis Steering Committee, comprised of public and private sector stakeholders, to coordinate development efforts in selected targeted development areas surrounding the airport. This group has established various work groups to focus on gateways and beautification, marketing and branding, corridor business development, and access and transportation. The City of Memphis was awarded $1.26 million from the U.S. Department of Housing and Urban Development to partner with the Greater Memphis Chamber of Commerce, the University of Memphis, and Shelby County to develop a master plan for airport-centered economic development efforts. The federal funds were matched with $900,000 in local funds and in-kind services. The Airport Gateway Business Association (AGBA) was created in 2005 to provide leadership in planning, promoting, and developing the vitality of the area around the General Mitchell International Airport in Milwaukee, marketed as the “Gateway to Milwaukee.” Funding is provided through an Airport Gateway Business Improvement District, managed by AGBA, and stakeholders represent the State of Wisconsin, the City and the County of Milwaukee, the Milwaukee 7 (seven counties united around an agenda to grow, expand and attract world-class businesses and talent), Visit Milwaukee, and the General Mitchell International Airport. Officials representing customs brokers and freight forwarders in Miami indicated the importance of collaboration between stakeholders. That is, the industry depends on well-established relationships between those responsible for importing and inspecting cargo and those routing it to its final destinations. Infrastructure is also necessary, including refrigerated storage, fumigation facilities, and information technology systems. Another official, representing floral importers of Florida, said that the established infrastructure and relationships needed to support a supply chain are not easy to replicate and help to ensure that Miami International Airport does not lose its position to another airport as the primary gateway for most of the flowers imported into the United States. Officials at Lambert-St. Louis International Airport also explained that freight forwarders serve as “gatekeepers,” determining what route freight takes to get from its origin to its destination. Based on our review of studies and discussion with regional stakeholders, we have developed an organizational framework that describes 5 factors—development at the airport, air and surface connectivity, funding mechanisms for development, development in the region, and stakeholder collaboration—to consider when approaching airport-centric development. We could not determine if each of these factors are needed or if one factor could be substituted for another. However, consideration of these factors may be helpful as government officials and private-sector developers develop their plans and analyses when considering undertaking airport-centric development or projects supporting airport- centric development. Some countries enjoy the concurrent green field development of airports, the regions, and the facilities that comprise airport-centric development. In the United States, however, where there are many long-established airports, most airport-centric development is implemented through a series of targeted projects and activities to build upon what already exists. The success of these projects or activities does not ensure the success of an entire airport-centric development. Similarly, the presence of an economically viable airport in an economically successful region does not necessarily mean that targeted airport-centric development efforts were responsible for success. We provided a draft of this report to the Federal Aviation Administration (FAA), the Department of Commerce (DOC), the Department of Housing and Urban Development (HUD), the Environmental Protection Agency (EPA), and representatives from the Airports Council International (ACI), Airlines for America (A4A), the Cargo Airline Association (CAA), and academic experts for review and comment. We invited airport and regional stakeholders to comment on the portions of this report draft that pertained to them. FAA, HUD, and EPA provided technical comments on the various programs under their purview that we incorporated as appropriate. ACI, A4A, CAA, and the academic experts, generally, agreed with the approach and information in the draft. One expert indicated that an evaluative approach would have been more useful for policymakers. Some stakeholders provided technical information that we incorporated as appropriate. We are sending copies of this report to the Secretary of Transportation, the appropriate congressional committees, and others. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff members have any questions about this report, please contact me at (202) 512-2834 or dillinghamg@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 major contributions to this report are listed in appendix V. Airport-centric development is occurring in many countries of the world, including the U.S. According to Kasarda, for example, Asia is second to North America (21 versus 40) in the number of airport-centric developments; Europe has 20 airport-centric developments. Globally, Kasarda identified 35 airport cities and 56 aerotropolises (see table 3). Some countries with developing economies, including China, India, South Korea, and the UAE, are building new airports in conjunction with planned cities on the airport property, called “airport cities,” and beyond airport property (“aerotropolises”) to provide services for travelers and shippers. Appendix II: Profiles of U.S. Airport Regions According to a regional business journal, the Maryland Board of Public Works approved and awarded a $10 million design contract to design a new connection between two of the airport’s terminals. Airport officials said that the expansion , which will allow passengers to pass through security checkpoints to access shops and restaurants at the airport’s A, B, and C terminals without passing through any further checkpoints, is expected to cost about $100 million to complete. (Sernovitz, Daniel J., “BWI Airport awarded $10 million for terminal expansion,” Baltimore Business Journal, Baltimore, MD: April 12, 2011), accessed November 14, 2011, http://www.bizjournals.com/baltimore/print-edition/2011/08/12/bwi-airport-awarded-10-million.html.). According to the BWI Business Partnership website, the Partnership is a business development and transportation advocacy organization with nearly 175 business and government agency members representing local and regional businesses, and local, state and federal government agencies. customs tariffs until the goods leave the zone and are formally entered into U.S. Customs Territory. Merchandise that is shipped to foreign countries from FTZs is exempt from duty payments. This provision is especially useful to firms that import components in order to manufacture finished products for export. This report describes the factors that our research and airport operators, government officials, developers, and other stakeholders identified as key considerations for airport-centric development. Specifically, this study describes the activities of stakeholders who are engaged airport-centric development and the motivations and beliefs of those stakeholders with respect to their efforts. To determine the key characteristics of airport centric development, in the United States and internationally, we first conducted a bibliographic search of relevant articles and books cited in the following data-bases. (See table 18.) We supplemented the citations we obtained from this search with those from the bibliographies of other studies we had obtained, and recommendations from experts we interviewed. After screening the abstracts of these studies for relevance, we collected information from these studies for further analysis. To supplement the information obtained from our literature review, we spoke with federal officials at the Department of Transportation and its Federal Aviation Administration; the Economic Development and International Trade Administrations within the Department of Commerce; and the Environmental Protection Agency. We also spoke with experts in transportation, trade, logistics, and community development about airport-centric development issues. To obtain information about airport-centric activities, we selected a purposeful sample of airports based on the number of passengers and amount of cargo served; expert recommendations; and geographical representation. This selection procedure yielded of the following 12 scheduled airline and 2 industrial airports for closer study (see fig. 7). From this purposeful sample of 14 airports, we selected 7 sites to visit to understand the activities and perceptions of stakeholders; we conducted telephone interviews with representative of and stakeholders involved with the other 7 airports. See table 19. To obtain a full range of relevant stakeholder perspectives on the airport- centric development efforts, we interviewed airport officials; executives from businesses located adjacent or near to airports; representatives of real estate development organizations; local and regional economic development specialists, and federal, state, and local government officials. We attempted to identify critics of airport-centric development in each airport region, but we were generally unable to identify critics. We conducted our interviews using a semi-structured approach that allowed our interviewees to respond to provide the information that was most relevant for their airport and region in each of several broad areas. These areas included: challenges interviewees had experienced in their development efforts; ways they had or might address those challenges; the likely success of their development efforts; factors that might facilitate or hinder development; any lessons learned or advice the interviewees identified for others interested in such development efforts; their assessment of the impact of the considerations for their initiative; and illustrative examples of how their development efforts had proceeded. This approach permitted stakeholders at each site to tailor information based on their own experiences, but does not allow for generalizations about how the considerations may impact on the progress of all airport- centric developments or whether such development should be considered at any given locality. To understand the level of development planned and efforts underway, we also reviewed available plans related to the airport- centric development efforts including project plans and airport master plans. Based on our literature review and the interviews we conducted with experts, agency officials, and stakeholders, we identified the following factors considered by stakeholders at selected U.S. airports and regions when pursuing airport-centric development: 1) development at the airport, 2) air and surface connectivity, 3) funding sources for development, (4) development in the region, and (5) collaboration among stakeholders. In this report, we use these 5 factors to discuss how these considerations generally relate to airport-centric developments and provide our observations about how particular localities applied these considerations. Throughout the report we use the indefinite quantifiers, “some”, “many”, and “most” to inform the reader of the approximate quantity of stakeholder or interviewee type within the regions where we interviewed that agreed with the particular statement or idea, without actually stating the specific number of those in agreement in each case. To determine when to use each indefinite quantifier, we split the total of each type of stakeholder group into thirds, so that “some” would refer to more than one but fewer than or equal to one-third of the group; “many” would refer to more than one-third but fewer than or equal to two-thirds of the group; and, “most” would refer to more than two-thirds of the group but not the full group. The corresponding numeric range of values for each stakeholder group can be found in the table below. For example, most of the airport representatives would refer to between 10 and 13 (of the total 14). In addition to the contact named above, Maria Edelstein, Assistant Director; Amy Abramowitz; Leia Dickerson; John Healey; William King; Kirsten Lauber; and Richard Scott, Ph.D made key contributions to this report. Appold, Stephen J., and John D. Kasarda. “The appropriate scale of US airport retail activities.” Journal of Air Transport Management, vol. 12, no. 6 (2006): 277-287. Bogue, Donald Joseph, and Ernest Watson Burgess. Contributions to urban sociology. Chicago: University of Chicago Press, 1964. Button, K., “Air Transportation Infrastructure in Developing Countries: Privitization and Deregulation,” In Aviation Infrastructure Performance: A Study in Comparative Political Economy, edited by Clifford Winston and Gines de Rus, 193-221. Washington, D.C.: Brookings Institution Press, 2008. Chaudhuri, Sumana, “Impact of Privatization on Performance of Airport Infrastructure Projects in India: A Preliminary Study.” International Journal of Aviation Management, vol.1, no.1&2 (2011): 40-57. Conway, H.M. The Airport City: Development Concepts for the 21st Century, Revised Edition, Atlanta, GA: Conway Publications, Inc., 1980. Freestone, Robert. "Planning, Sustainability and Airport-Led Urban Development." International Planning Studies, vol.14, no. 2 (2009). Greis, Noel P., and John D. Kasarda. “Enterprise Logistics in the Information Era.” California Management Review, vol. 39, no. 4 (1997) 55-78. Ishutkina, M.A. and R. John Hansman, “Analysis of Interaction between Air Transportation and Economic Activity (Cambridge, MA: International Center for Air Transportation, MIT, 2008). Kasarda, John D. “Airport cities & the aerotropolis: New planning models.” Airport Innovation, (2007): 106-110. Kasarda, John D. “Airport Cities.” Urban Land, April (2009): 56-60. Kasarda, John D. “Airport-Related Industrial Development.” Urban Land, June (1996): 54-55. Kasarda, John D. “Asia’s emerging airport cities.” International Airport Review, vol. 10, no. 2 (2004): 63-66. Kasarda, John D. “Shopping in the airport city and aerotropolis.” Research Review, vol. 15, no. 2 (2008): 50-56. Kasarda, John D. “The aerotropolis and global competitiveness.” Diplomatic Courier, December (2011): 16-19. Kasarda, John D. “The Global TransPark: Logistical Infrastructure for Industrial Advantage.”Reprint Urban Land, (1998). Kasarda, John D. “The Rise of the Aerotropolis.” Next American City, Spring 2006. Accessed June 24, 2011. Kasarda, John D. “Time-Based Competition & Industrial Location in the Fast Century.” Real Estate Issues, (1998/99) 24-29. Kasarda, John D. and Greg Lindsay. Aerotropolis: The Way We’ll Live Next, 1st edition. New York, NY: Farrar, Straus and Giroux, 2011. Kasarda, John D., “The Evolution of Airport Cities and the Aerotropolis,” Chapter 1 in Airport Cities: The Evolution (London: Insight Media, 2008). Kasarda, John D., and David L. Sullivan. “Air Cargo, Liberalization, and Economic Development.” Annals of Air and Space Law, vol. XXXI (May 2006). Kasarda, John D., and Jonathan Green. “Air cargo as an economic development engine: A note on opportunities and constraints.” Journal of Air Transport Management, vol. 11, no. 6 (2005): 459-462. Kasarda, John D., and Greg Lindsay, Aerotropolis: The Way We’ll Live Next, (New York, NY: Farrar, Straus and Giroux, 2011). Morrison, Stephen A. and Clifford Winston, ”Delayed: U.S. Aviation Infrastructure Policy at A Crossroads,” In Aviation Infrastructure Performance: A Study in Comparative Political Economy, edited by Clifford Winston and Gines de Rus, 7-35. Washington, D.C.: Brookings Institution Press, 2008. Oliver Clark and John D. Kasarda, editors, Global Airport Cities (Twickenham, London: Insight Media, 2010). Peneda, Mauro José Aguiar; Vasco Domingos Reis, Maria do Rosário M.R. Macário. "Critical Factors for Development of Airport Cities." Transportation Research Record: Journal of the Transportation Research Board, no. 2214 (2011): 1-9. Sheffi, Yossi, Logistics Clusters: Delivering Value and Driving Growth, Boston, MA: MIT Press, 2012. Stock, Gregory N.; Noel P. Greis, and John D. Kasarda. “Logistics, strategy and structure: A conceptual framework.” International Journal of Operations & Production Management, vol. 18, no. 1 (1998): 37-52. Vastag, Gyula; John D. Kasarda, and Tonya Boone. “Logistical Support for Manufacturing Agility in Global Markets.” International Journal of Operations & Production Management, vol. 14, no. 11 (1994): 73-85. Vespermann, Jan; Andreas Wald. "Long-term perspectives of intermodal integration at airports." Journal of airport management, vol.4, no. 3 (2010): 252-264. Yeung, J.H.Y., Waiman Cheung, Michael Ka-yiu Fung, Xiande Zhao, and Min Zhang, “The Air Cargo and Express Industry in Hong Kong: Economic Contribution and Competitiveness.” International Journal of Shipping and Transport Logistics, vol. 2, no.3 (2010): 321-345.

Summary: GAO was asked to examine airport-centric development and the activities of airport operators and regional stakeholders to facilitate such development. In an effort to increase airports' efficiency in moving passengers and cargo while bolstering the economies of regions surrounding airports, some airport operators, government officials, and business owners are exploring opportunities to strategically develop airports and the regions around them. This report describes the factors considered and actions taken by airport operators, government officials, developers, and others to facilitate airport-centric development. To do this work, GAO identified five factors that facilitate airport-centric development from relevant literature, interviews with experts, and observations at selected U.S. airports and their surrounding regions. GAO examined these factors by reviewing relevant documents and interviewing stakeholders, including airport officials, business owners, representatives of development organizations, and federal, state, and local government officials. GAO selected 14 airports for more in-depth study. These airports were selected based on annual passenger enplanements and cargo amounts, and experts' recommendations. The findings from these 14 airports cannot be generalized but provide insights that may be of interest to stakeholders in other regions. GAO is not making recommendations in this report. The Department of Transportation, the Federal Aviation Administration, and others provided technical comments, which were incorporated as appropriate. GAO found that airport operators, government officials, real estate developers, and other regional stakeholders are taking actions consistent with five factors when pursuing airport-centric development (development on the airport property to enhance the airport's nonaeronautical revenue and development outside the airport that leverages a region's proximity to the airport). Development at the airport. Airport operators are developing or enhancing the number and types of services within airport terminals for passengers and visitors such as upscale shops and personal services; they are also developing services for passengers and businesses outside of the terminal areas but on airport property such as hotels and business centers. Air and surface connectivity. Most stakeholders GAO spoke with noted that a region's ability to connect to a variety of domestic and international destinations by air is important in attracting businesses, tourists, and cargo to the region. In addition to air connectivity, the routes taken by passengers or cargo to and from the airport may be enhanced by efficient highway, rail, and port connections. One example is the Metrorail extension, which will connect Dulles International Airport with downtown Washington DC. Funding sources. Transportation improvements for airport-centric development may entail large capital-intensive projects that generally require pooling money from different sources. The federal government has a number of programs, such as grants from the Economic Development Administration, designed to support regional transportation-infrastructure development. State and locally generated money--such as state transportation trust funds, dedicated sales taxes, and highway tolls--have been used to match federal funds. Stakeholders in Memphis, for example, were awarded a $1.26 million grant from the Department of Housing and Urban Development, matched with $900,000 in local funds and in-kind services, to develop a master plan for their airport-centric development efforts. The private sector may also provide funding through a public-private partnership agreement. Development in the region. Stakeholders GAO spoke with identified a variety of mechanisms to attract businesses, such as linking airport development to commercial activities in the region; identifying and leveraging unique cultural, tourist, or general qualities of the region; developing industry clusters (groups of complementary businesses); and designing policies or providing incentives to attract businesses to the region. Stakeholder collaboration. Collaboration among various stakeholders can help achieve specific airport-centric goals. Consultation with residents near the airport and with committee composed of representatives from the airport and the public and private sectors is important; the lack of such consultation can make it difficult to implement development plans. GAO found that multilateral committees representing airport, public-sector, and private-sector groups had been established to promote airport-centric development.