Airport Financing

Compliance With Federal Grant Requirements Gao ID: RCED-97-179R June 19, 1997

Pursuant to a congressional request, GAO reviewed the Federal Aviation Administration's (FAA) compliance with funding requirements for federal grants for airport-related development to determine if established regulations and procedures were satisfied, focusing on federal funding for the construction of the new Northwest Arkansas Regional Airport and its highway connector road.

GAO noted that: (1) FAA followed its grant award process, which allows for a subjective assessment of needs; (2) FAA's approval of federal funding for the airport was based, in part, on its subjective assessment that the new airport would replace Drake Field as the region's commercial service airport; however, it is uncertain whether that will occur; (3) FAA made this assumption knowing that the city of Fayetteville passed two resolutions stating its intent to keep Drake Field open as a commercial service airport and to let airlines choose which airport to use; (4) thus, FAA may now have to use Airport Improvement Program funds to support two commercial service airports--in a relatively limited market--within 30 miles of each other; (5) FAA did not take sufficient steps to ensure that the project met two of five key criteria before issuing a letter of intent for the new airport; (6) FAA's judgment on systemwide capacity was not based on a clear determination that the project significantly enhanced systemwide capacity, and its benefit/cost analysis was based on information that was, in some cases, unverified or outdated; (7) FAA used unverified weather data to calculate delays at Drake Field; (8) FAA factored in thundershower delays for Drake Field and assumed that these delays would not occur at the new airport, but had no reliable data on the frequency of thundershowers or any rationale explaining why thundershower delays would be a safety issue at Drake Field but not at the new airport, located less than 30 miles away; (9) FAA did not update the benefit/cost analysis to reflect conditions that had changed since the original analysis was prepared in 1994; (10) the federal funding share of 95 percent for the new airport's highway connector was established by statute; (11) a comparison with the federal share for other airport connectors could not be made because the Federal Highway Administration does not maintain the kind of information needed to make a comparison; (12) a degree of uncertainty exists with each of the components upon which the viability of the new airport depends; and (13) GAO believes that the most problematic of the factors affecting the airport's viability is the degree to which the volume of passengers meets the projections, because none of the air carriers currently serving Drake Field has committed to use the new airport and the degree to which these projections can be achieved within specified time frames remains unknown.

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