Airport Financing

To ensure the safe and continuing operation of the national airport system, airports across the country--from large passenger facilities like Chicago O'Hare to small general aviation airports--plan a wide range of capital development projects, including new runways, passenger terminals, navigational aids, and roadway access. In 1996, the 3,304 airports in this system obtained about $7 billion for capital development, more than 90 percent of which came from airport and special facility bonds, funding made available from the Airport and Airway Trust Fund, and passenger facility charges paid on each airline ticket. However, this amount falls short of the $10 billion that airports anticipate that they will need annually for development planned through 2001. Several proposals have been made in recent years to boost funding for airports, including increasing the size of the federal grant program, raising the ceiling on passenger facility charges, and leveraging existing funding sources. GAO believes that the Federal Aviation Administration's pilot programs to use grants in more innovative ways and to privatize airports are likely to yield only marginal benefits because of limited participation by airports. However, using federal airport grants to capitalize state revolving funds might prove more successful in expanding airport investment. GAO summarized this report in testimony before Congress; see: Airport Financing: Comparing Funding Sources With Planned Development, by Gerald L. Dillingham, Associate Director for Transportation Issues, before the Subcommittee on Aviation, House Committee on Transportation and Infrastructure. GAO/T-RCED-98-129, Mar. 19 (16 pages).

GAO noted that: (1) in 1996, the 3,304 airports that make up the national airport system obtained about $7 billion for capital development; (2) more than 90 percent of this funding came from three sources: airport and special facility bonds ($4.1 billion), funding made available from the Airport and Airway Trust Fund ($1.4 billion), and passenger facility charges paid on each airline ticket ($1.1 billion); (3) capital funding more than doubled from 1982 through 1992 and has since declined; (4) airports' 1996 capital funding of about $7 billion is less that the $10 billion per year that airports anticipate will be needed to fund the development planned for 1997 through 2001; (5) while this difference is not an absolute predictor of future funding shortfalls--both funding and planned development may change in the future--it does provide a useful indication of where funding differences may be the greatest; (6) the difference between past funding and planned development is especially acute for smaller commercial and general aviation airports, whose 1996 funding was a little over half of the estimated costs of their planned development; (7) the picture is somewhat brighter if the categories of planned development are narrowed to just those the Federal Aviation Administration (FAA) gives highest priority--that is, safety, security, and noise-mitigation projects and the maintenance of existing airfields; (8) with the exception of the small commercial airports, federal grants in 1996 matched or exceeded the planned development for such projects; (9) several proposals to increase funding for airports have emerged in recent years; (10) these include increasing the size of the federal grant program, raising the ceiling on passenger facility charges, and leveraging existing funding sources; (11) each proposal varies in its magnitude and in its effect on airports and their users; (12) increasing the size of the federal grant program would mostly help smaller airports, while raising passenger facility charges would mostly help larger airports; (13) GAO believes that the FAA's current pilot programs to use grants in more innovative ways and to privatize airports are likely to yield only marginal benefits; (14) however, another means to expand airport investment would be to use federal airport grants to capitalize state revolving funds; and (15) while not a currently permitted use for federal airport grants according to FAA officials, state revolving funds have proved successful in other infrastructure sectors.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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