Yesterday, the United States House of Representatives Committee on Transportation and Infrastructure held a hearing to address outdated investment policies related to the nation’s airport infrastructure. Airport representatives there urged members of Congress to raise federal caps on charges that support infrastructure development of landside facilities
Several witnesses testified at the hearing, including Competitive Enterprise Institute Senior Fellow Marc Scribner, Cincinnati/North Kentucky International Airport (CVG) CEO Candace S. McGraw, Tampa International Airport (TPA) CEO Joe Lopano and Spokane International Airport (GEG) CEO Lawrence J. Krauter.
Witnesses requested that Congress help airports repair aging facilities and build critical infrastructure projects by updating outdated policies and adopting new provisions. As outlined by Krauter during his testimony, these policy changes include:
- Adjusting the outdated federal cap on local Passenger Facility Charges (PFCs);
- Increasing funding for the Airport Improvement Program (AIP) account to enable smaller airports afford necessary upgrades; and
- Making important policy changes within the U.S. Federal Aviation Administration (FAA) National Priority Ranking system to give higher priority to terminal renovation and expansion projects in recognition of the shift in airport infrastructure deficiencies from airside to landside facilities.
Adjusting the federal cap on PFCs – currently allowing for a maximum PFC of $4.50 per passenger enplanement – would allow airports to finance a greater share of their projects with local user fee generated revenue, without requiring support from airlines that may be reluctant to approve facilities that allow for increased competition, according to Krauter. He also said that increasing AIP account funds would enable smaller airports the ability to afford necessary upgrades, and that shifting the prioritization of terminal renovation and expansion projects is a necessary refinement to policy because any increase in AIP funding would not be effective to help airports struggling with growth-related challenges and outdated terminal buildings.
“Unfortunately, existing federal law inhibits the ability of airports to self-fund these important terminal, runway and ground-access projects,” McGraw said during her testimony.
McGraw described the impact of the existing PFC policy on CVG as a medium-sized airport – also home to one of three super–hubs for DHL Express and the site for Amazon’s primary air cargo hub – and said that the revenues it collects and will collect in future are almost entirely allocated to first, reimbursing completed projects (such as a runway that was constructed in the early 2000s) and secondly, paying down a PFC-backed debt service that financed a new entrance road for passengers at the airport. These existing obligations limit how much PFC revenue is available for new projects – including those in CVG’s 2050 Master Plan Update that the airport is submitting to the FAA later this year.
According to testimony during the hearing, lifting the cap would grant airports more local control over revenue sources, which would enable them to complete projects more quickly and efficiently. McGraw also said that should the PFC cap be lifted to $8.50 and indexed to inflation going forward, airports’ ability to fund capital projects on a pay-go basis would change significantly. CVG estimates it could fund an additional $340 million in new PFC project costs, while still meeting debt service requirements.
Meanwhile, AIP funding has remained flat over the past 12 years, which has decreased airports’effective buying power from AIP funds, according to Krauter. For smaller airports, such as GEG, the amount resulting from this is often insufficient to address the total cost of eligible projects, according to Krauter. This forces the airport to compete for discretionary funding from the FAA or to divide a project into multiple phases, which is inefficient and ultimately costs more. The airport also then must bid projects in multiple schedules to match funding constraints and ask contractors to hold prices for one year to the next, which is risky for those businesses. Krauter said that the fact that the FAA withholds discretionary funding from low-priority projects effectively “shuts off” any of the existing inadequate revenue stream.
Whether Congress accepts and implements the suggestions from these policy proposal remains to be seen, but would be welcome news for U.S. airports as global competitors, of all sizes, are supported by government investment in their own aviation and logistics infrastructure projects.Like This Post