Guidelines for Providing Financial Stability for our Nation's Airports & The Communities They Serve

The decrease in airline travel ever since September 11th has created a serious financial situation for all airports.

The nation's airports are largely publicly owned either by city, county, state entities or regional public authorities. Because of reduced revenues obtained from Passenger Facility Charges (PFCs), parking fees, landing fees, rent, and other sources, airports are incurring substantial revenue losses. Additionally, the Airport and Airway Trust Funds that are funded by the federal ticket tax to assist with airport infrastructure projects are also threatened with declining receipts.

The loss of revenue from these sources is affecting the ability of state and local governments and airport authorities to operate airport facilities, meet outstanding debt obligations associated with airport construction and renovation, and continue or initiate planned capital improvement projects. At the same time, substantial airport resources are now being redirected toward enhancing airport security.

GFOA Position

Federal government support for airports during these critical times is essential. The GFOA in concert with other state and local government organizations encourages the federal government to adopt the following measures in order to ensure the fiscal well being of the national air transportation system.

• Provide Airports with Immediate Funding to Pay for Increased Security - Airports should be provided with federal reimbursement for the additional costs of security measures mandated by the Federal Aviation Administration (FAA), as well as any subsequent FAA security mandates, with reimbursement covering both accrued as well as ongoing compliance costs. Any federal legislation addressing airport security that imposes additional security measures on airports should include funding mechanisms to reimburse airport operators for increased costs associated with such requirements
• Establish Priority of Airline Payments to Airports - Any commercial air carrier receiving federal assistance, loan or a loan guarantee should be required to pay from such assistance all currently due federal, state or local taxes together with PFCs and all other amounts owed to airports, and continue payments during the life the such assistance.
• Ensure Continued Funding for Current and Future Airport Projects - Because of the sharp decline in revenues, many capital projects that were about to start, or were in progress, cannot move forward without federal financial assistance. It is important that funding is secured for airport capital projects, which will directly stimulate local economies and provide construction and related jobs.
• Provide Greater Flexibility for PFC and FAA's Airport Improvement Program (AIP) Funds Use - Congress should allow airports the ability to temporarily use PFC and AIP funds for security costs and, if needed, to pay outstanding debt obligations.
• Allow Airports to Refinance Debt and Take Advantage of Today's Lower Interest Rates - Much of the approximately $70 billion borrowed by airports over the last few years is in the form of tax-exempt municipal bonds with 20 to 30 year maturities, typically with rates fixed at the time of borrowing. Over the last year, interest rates on tax-exempt bonds have fallen substantially. Unfortunately, current laws do not allow airports to restructure debt and capture savings as many homeowners do by refinancing their mortgages when interest rates drop. As part of a financial stability package, Congress should permit airports to issue advance refunding bonds to take advantage of today's lower interest rates. Allowing airports to refinance debt and reduce interest cost payments will provide additional financial resources to meet their operational, maintenance and security obligations.
• Assure Access to War-Risk Insurance Coverage - Unless airports can continue to obtain affordable war-risk insurance coverage, many will be forced to shut down critical operations because of liability concerns. It is vital that Congress provide some form of relief - whether similar to that contained in the Air Transportation Safety and System Stabilization Act for commercial airlines or outright indemnification, as the Canadian Government has provided its airports - to ensure that airports have continued access to this critical coverage.

• Publication date: January 2001