Year of Aviation

'Year of Aviation' With raised expectations, industry looks for long-term funding reform. Here are the basics of the debate BY John F. Infanger, Editorial Director March 1999 For better or worse, blame it all on U.S. Rep. Bud...

Rep. James Oberstar (D-MN), ranking Democrat on the House Transportation & Infrastructure Committee, says the PBO proposal for ATC would compromise safety. Rep. Shuster reacted with deep concern for removing the general fund contribution , citing the benefit to the general public and military. And Sen. McCain says he is "disappointed that the Administration-proposed AIP level is down $350 million from the amount that Congress appropriated in fiscal year 1999. Although the Administration talks about a commitment to improving the nation's aviation infrastructure, it fails to follow through in its budget request."

Meanwhile, NASAO's Ogrodzinski sums up the position of many when he states, "The most important thing from the states' viewpoint is adequate, sustained funding for airports."

Potential PFC Changes
For airport groups, a long-term funding equation needs to include raising or eliminating the cap of $3 currently set on passenger facility charges (PFCs) permitted for use in infrastructure development at commercial U.S. airports.

Rep. Shuster and the Clinton Administration are willing to raise the cap; Sen. McCain, however, calls for reforming the current tax system before raising PFCs.

Both the American Association of Airport Executives, which represents airport managers, and Airports Council Int'l-North America, which represents major airports, see PFC reform as a critical link to finance reform for the entire airport system.

Explains AAAE president Chip Barclay, "Our view is that the semantics that are appropriate are that we need to repeal the provisions of the FAA act that are limiting the local governments' ability to come up with their own capacity solutions. It's not an issue of lifting the cap a couple of bucks; it's more that you've got the federal government telling local government that they can't solve their own problems even if they have the financial wherewithal to do so.

"I can't think of any other fees in which the federal government steps in and says, 'You're not allowed to charge what your own local government process can come up with as a relationship between cost and need.'

"You need to lift the cap on PFCs and repel that restriction on local control, and tie to that (releasing) higher AIP dollars for smaller airports. The PFC is a solution for the largest airports in the system; smaller airports also have to have their infrastructure needs met. For the airport industry, we want to see something for everyone in the mix."

One of the strongest opponents to lifting the $3 PFC cap is the Air Transport Association, which represents the major air carriers. ACI-NA's Plavin questions the level of commitment behind that opposition.

"There are airlines today, I can tell you, that will say, 'PFCs are good for me and my airline,'" he explains. "They're overwhelmingly (used on) projects the airlines like and favor. There are a couple of airlines that don't like PFCs and, because they (ATA) don't have a consensus, it's just much easier to say no."

Plavin adds that in time the greater issue for the air carriers may become that of the Administration's proposal for new user fees. "They have reason to be concerned that user fees will get piled on top of existing taxes they pay instead of replacing them," says Plavin.

While some in industry also propose other funding mechanisms - revolving state loans for hangar construction is one suggestion - AAAE's Barclay says the focus should be on long-term planning and PFC reform. "The truth is there already is a revolving loan fund out there for airports: It's called Wall Street. If you have the ability to borrow, you can go either to a local bank or to Wall Street and sell bonds. The only thing government very often gets you in a revolving loan fund is a slightly lower interest rate," he says.

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