Passenger Facility Charges:

Program Implementation and the Potential Effects of Proposed Changes

RCED-99-138: Published: May 19, 1999. Publicly Released: May 19, 1999.

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John H. Anderson, Jr
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Pursuant to a congressional request, GAO provided information on the passenger facility charge program, focusing on: (1) how the program is helping airports fund their capital development; and (2) the potential impact of various proposals to change the program, including the option of making no change.

GAO noted that: (1) passenger facility charges provided about 18 percent of the funds available to commercial service airports to pay for capital development in 1996, the most recent year for which data for all sources are available; (2) 52 percent of the 529 eligible airports are levying the fee; (3) the larger the airport, the more likely it is to participate; (4) as of September 1998, the Federal Aviation Administration had approved the collection of nearly $22 billion in passenger facility charges overall; (5) because the amount of funds an airport receives is based on the number of passengers, over 90 percent of those collections will go to the large airports; (6) 44 percent of the funds have been approved for projects such as the construction of aircraft gates and access roads, while 29 percent have been approved to pay the interest on bonds issued for eligible development projects; (7) 20 percent of the funds have been approved for projects related to areas such as runways and aprons, while 7 percent have been approved to reduce airport-related noise; (8) proposals to change the passenger facility charge program fall into three main categories: (a) increasing the maximum charge; (b) changing the types of projects eligible for funding; or (c) adding project selection criteria; (9) airports' receipts total about $1.4 billion a year, with all but one participating airport charging the maximum $3 fee; (10) GAO's analysis indicates that with a $1 increase, if all airports raise their fee, airports would receive close to $500 million in additional revenues; (11) GAO developed a model to estimate the potential impact of higher fees on passenger levels, using historical data on the relationship between prices and passenger levels; (12) GAO's model estimates the effect of changing the passenger facility charge independently of other factors that may occur simultaneously; (13) these and other factors could enhance or offset the effect of changing the passenger facility charge, making the net effect difficult to determine; and (14) increasing the maximum fee from $3 to $7 would generate about $1.63 billion more for large airports charging the fee, thereby eliminating an annual $1.5 billion funding difference, on average, that GAO identified between large airports' future planned development costs ($7.1 billion a year on average) and the funding they had available in 1996.

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