Financing Airport Improvements (CRS Report for Congress)
Premium Purchase PDF for $24.95 (32 pages)
add to cart or
subscribe for unlimited access
Pro Premium subscribers have free access to our full library of CRS reports.
Subscribe today, or
request a demo to learn more.
Release Date |
Revised March 15, 2019 |
Report Number |
R43327 |
Report Type |
Report |
Authors |
Rachel Y. Tang, Analyst in Transportation and Industry; Robert S. Kirk, Specialist in Transportation Policy |
Source Agency |
Congressional Research Service |
Older Revisions |
-
Premium Revised May 10, 2017 (30 pages, $24.95)
add
-
Premium March 24, 2016 (30 pages, $24.95)
add
|
Summary:
There are five major sources of airport capital development funding: the federal Airport Improvement Program (AIP); local passenger facility charges (PFCs) imposed pursuant to federal law; tax-exempt bonds; state and local grants; and airport operating revenue from tenant lease and other revenue-generating activities such as landing fees. Federal involvement is most consequential in AIP, PFCs, and tax-exempt financing.
The AIP has been providing federal grants for airport development and planning since the passage of the Airport and Airway Improvement Act of 1982 (P.L. 97-248). AIP funding is usually spent on projects that support aircraft operations such as runways, taxiways, aprons, noise abatement, land purchase, and safety or emergency equipment. The funds obligated for AIP are drawn from the airport and airway trust fund, which is supported by a variety of user fees and fuel taxes. Different airports use different combinations of these sources depending on the individual airport's financial situation and the type of project being considered. Although smaller airports' individual grants are of much smaller dollar amounts than the grants going to large and medium hub airports, the smaller airports are much more dependent on AIP to meet their capital needs. This is particularly the case for noncommercial airports, which received over 25% of AIP grants distributed in FY2018. Larger airports are much more likely to issue tax-exempt bonds or finance capital projects with the proceeds of PFCs.
The FAA Reauthorization Act of 2018 (P.L. 115-254) provided annual AIP funding of $3.35 billion from the airport and airway trust fund for five years from FY2019 to FY2023. The act left the basic structure of AIP unchanged, but authorized supplemental annual funding of over $1 billion from the general fund to the AIP discretionary funds, starting with $1.02 billion in FY2019, and required at least 50% of the additional discretionary funds to be available to nonhub and small hub airports. The act included a provision permitting eligible projects at small airports (including those in the State Block Grant Program) to receive a 95% federal share of project costs (otherwise capped at 90%), if such projects are determined to be successive phases of a multiphase construction project that received a grant in FY2011.
The 2018 reauthorization expanded the number of states that could participate in the State Block Grant Program from 10 to 20 and also expanded the existing airport privatization pilot program (now renamed the Airport Investment Partnership Program) to include more than 10 airports. The law included a provision that forbids states or local governments from levying or collecting taxes on a business at an airport that "is not generally imposed on sales or services by that State, political subdivision, or authority unless wholly utilized for airport or aeronautical purposes."
The airport improvement issues Congress generally faces in the context of FAA reauthorization include the following:
Should airport development funding be increased or decreased?
Should the $4.50 ceiling on PFCs be eliminated, raised, or kept as it is?
Could AIP be restructured to address congestion at the busiest U.S. airports, or should a large share of AIP resources continue to go to noncommercial airports that lack other sources of funding?
Should Congress set tighter limits on the purposes for which AIP and PFC funds may be spent?
This report provides an overview of airport improvement financing, with emphasis on AIP and the related passenger facility charges. It also discusses some ongoing airport issues that are likely to be included in a future FAA reauthorization debate.