Los Angeles World Airports Executive Encourages Congress to Re-Examine Airport Funding Formulas

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Mar 18, 2010, 09:12 ET

LOS ANGELES, March 18 /PRNewswire/ -- Changes in how federal funds are allocated to U.S. airports will help airports better leverage their revenues so they can reinvest in their facilities, many of which are in a decades-long state of "deferred maintenance," a Los Angeles airport official told a Congressional committee today.

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Speaking before the Appropriations Committee of the House Sub-Committee for Transportation, Housing and Urban Development, Los Angeles World Airports (LAWA) Executive Director Gina Marie Lindsey said permanent exemption from the alternative minimum tax for public-use airport project financing, redistribution of federal airport improvement grants toward airports serving higher numbers of passengers, and increasing the cap on passenger facility charges will help airports keep the money they earn so they can reinvest in aging infrastructure. In addition, Lindsey said that increased funding for state-of-the-art, NextGen technology will help the Federal Aviation Administration (FAA) significantly improve the efficiency and safety of the nation's air traffic system.

Lindsey explained that the current temporary waiver of the alternative minimum tax until the end of this year has resulted in airports marketing $10 billion of airport revenue bonds during the past 18 months, of which $6.8 billion directly benefits from the AMT "holiday" by saving $635 million in what would have otherwise been used to pay additional financing and debt charges.

At Los Angeles International Airport (LAX) alone, Lindsey reported that LAWA saved $25 million in its sale of revenue bonds in 2009. LAWA expects to save more than $100 million in its sale next week of $897 million in bonds.

"These savings," said Lindsey, "Can now be used for tangible infrastructure improvements – steel, concrete, upgraded electrical systems and reconstructed roadways – rather than debt service and financing costs."

According to Lindsey, there are currently 3,400 existing and proposed airports eligible for Airport Improvement Program (AIP) grants from the FAA. However, the formula for distributing these grants has become so political as to favor smaller airports, such that during the last five years, large hub airports (the 33 busiest airports in the nation) that handled 85 percent of all U.S. air traffic received only 18.5 percent of the federal AIP grants.

The large hub airports, like LAX, relied upon revenues from aviation-related sources such as terminal leasing and aircraft landing fees, and from non-aviation sources such as concessions and parking, to achieve enough funds to pay for capital improvement construction projects. However, with today's era of no to slow growth in the airport industry, relying on these traditional sources for funding construction has become more difficult.

Lindsey asked the committee to examine the current formula used to allocate federal funds to airport improvement projects that yield the highest potential return to the nation's aviation system, thereby improving the economy much more quickly by increasing the number of jobs dependent upon those airports.

Lindsey also asked the committee members for their support of raising the limit on the Passenger Facility Charge (PFC) that is included in the FAA Reauthorization Bill currently pending before Congress. PFCs are discretionary, locally imposed user fees that are currently federally limited to $4.50 per enplaned passenger. This fee cap was established in 2000, and if imposed at an airport, that airport is required to relinquish 75 percent of its AIP entitlement funding, which is based upon the number of passengers using that airport.

Lindsey called the situation large hub airports face "a confluence of storms," where on one hand, taxes collected at their facilities massively subsidize AIP entitlement funding to small, very low volume airports. And on the other hand, if large airports turn to PFCs to help fund capital improvements, they must relinquish three-fourths of its federal entitlement funds.

By allowing the discretionary PFC amount to rise to the proposed $7 per enplaned passenger, Lindsey said that at LAX, "every dollar increase in the PFC yields $300 million in additional construction capacity." This would make possible "the promise of a restored and modernized LAX, which would also make very real 2,400 new, quality jobs."

Concluding, Lindsey said that when there was steady growth in passenger levels, "a multitude of challenges" facing airports seeking funding for airport infrastructure improvements were hidden. But in today's no to slower growth environment, changes to how federal funding is allocated for airport improvements will give "airports the means to leverage the revenue the airports generate to save, invest and build."

(NOTE: Lindsey's statement before Congress is available at www.lawa.aero.)

SOURCE Los Angeles World Airports