Airport Financing:

Funding Sources for Airport Development

RCED-98-71: Published: Mar 12, 1998. Publicly Released: Mar 18, 1998.

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Pursuant to a congressional request, GAO assessed airports' capacity to finance their future development, focusing on: (1) how much airports of various sizes are spending on capital development and where the money is coming from; (2) whether current funding levels will be sufficient to meet capital development planned for the 5-year period from 1997 through 2001; and (3) the potential effect of various proposals to increase airport funding, if a difference exists between current funding and planned development.

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.

Recommendation for Executive Action

  1. Status: Closed - Not Implemented

    Comments: On April 20, 1998, the Secretary of Transportation submitted, as part of the FAA reauthorization bill, a new statute that would implement GAO's recommendation. The statute, Section 47135(e)(1)-(7) would permit "a state to loan all or part of the federal share of allowable costs of an airport development project eligible under the state block grant program under section 47128 of this title to a sponsor of this project." However, neither the House or Senate reauthorization bills, H.R. 4057 and S. 2279, included DOT's proposed statute.

    Recommendation: To help smaller airports fund some of the cost of their capital development, but to avoid undermining the level of federal support for larger airports, the Secretary of Transportation should seek authority from Congress to use Airport Improvement Program grants to capitalize state revolving funds in those circumstances where states have a demonstrated capability and desire to manage a revolving fund.

    Agency Affected: Department of Transportation


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