Funding Sources Vary Depending on Airports’ Size

In 1996, tax-exempt bonds, the Airport Improvement Program (AIP), and passenger facility charges (PFC) together provided about $6.6 billion of the $7 billion in airport funding. State grants and airport revenue contributed the remaining funding for airports. The amount and type of funding varies with airports’ size. The nation’s 71 largest airports (classified by FAA as large hubs and medium hubs), which accounted for almost 90 percent of all passenger traffic, received more than $5.5 billion in funding in 1996, while the 3,233 other national system airports received about $1.5 billion. Funding Levels Fall Short of Plans for Development

Airports’ planned capital development over the period 1997 through 2001 may cost as much as $10 billion per year, or $3 billion more per year than in 1996. Figure 2 compares airports’ total funding for capital development in 1996 with their annual planned spending for development. Planned spending for future years, the bar on the right, is shown by the relative priority FAA has assigned to the projects, as follows:
Reconstruction and mandated projects, FAA’s highest priorities, total $1.4 billion per year and are for projects to maintain existing infrastructure (reconstruction) or to meet federal mandates, including safety, security, and environmental requirements, including noise mitigation requirements. Other high-priority projects, primarily adding capacity, account for another $1.4 billion per year. Other AIP-eligible projects, a lower priority for FAA, such as bringing airports up to FAA’s design standards, add another $3.3 billion per year for a total of $6.1 billion per year. Finally, airports anticipate spending another $3.9 billion per year on projects that are not eligible for AIP funding, such as expanding commercial space in terminals and constructing parking garages. Funding Difference at Smaller Airports Is More Significant Than at Larger Airports

The difference between current and planned funding for development is bigger, in percentage terms, for smaller airports than for larger ones. 3). 4). Larger airports potential shortfall of $1.5 billion represents 21 percent of their planned development costs, while smaller airports’ potential shortfall of $1.4 billion represents 48 percent of their development costs. Planned development  1997 through 2001  (annualized)

	Effect of Proposals to Increase and Better Use Airport Funding Is Mixed

Proposals to increase airport funding or make better use of existing funding vary in the extent to which they would help different types of airports and close the gap between funding and the costs of planned development. For example, increasing AIP funding would help smaller airports more because current funding formulas would channel an increasing proportion of AIP to smaller airports. The program allows FAA to award AIP funds in the form of block grants to designated states, that, in turn, select and fund AIP projects at small airports.
Why GAO Did This Study

Pursuant to a congressional request, GAO discussed airport funding issues, focusing on: (1) the amount airports are spending on capital development and the sources of those funds; (2) comparing airports' plans for development with current funding levels; and (3) what effect will various proposals to increase or make better use of existing funding have on airports' ability to fulfill their capital development plans.

What GAO Found

GAO noted that: (1) 3,304 airports that make up the federally supported national airport system obtained about $7 billion from federal and private sources for capital development; (2) more than 90 percent of this funding came from three sources: tax-exempt bonds issued by states and local airport authorities, federal grants from the Federal Aviation Administration (FAA) Airport Improvement Program (AIP), and passenger facility charges paid on airline tickets; (3) the magnitude and type of funding varies with airports' size; (4) the nation's 71 largest airports accounted for nearly 80 percent of the total funding; (5) airports planned to spend as much as $10 billion per year for capital development for the years 1997 through 2001, or $3 billion per year more than they were able to fund in 1996; (6) the difference between funding and the costs of planned development is greater for smaller commercial and general aviation airports than for their larger counterparts; (7) smaller airports' funding would cover only about half the costs of their planned development, while larger airports' funding would cover about 4/5 of their planned development; (8) airports' planned development can be divided into four main categories based on the funding priorities of AIP; (9) about $1.4 billion per year was planned for safety, security, environmental, and reconstruction projects, FAA's highest priorities for AIP funding; (10) another $1.4 billion per year was planned for projects FAA regards as the next highest priority, primarily adding airport capacity; (11) other projects FAA considers to be lower in priority, such as bringing airports up to FAA's design standards, add another $3.3 billion per year; (12) airports anticipated spending another $3.9 billion per year on projects that are not eligible for AIP funding, such as expanding commercial space in terminals and constructing parking garages; (13) several proposals to increase or make better use of existing funding have emerged in recent years, including the amount of AIP funding and raising the maximum amount airports can levy in passenger facility charges; (14) under current formulas, increasing the amount of AIP funding would help small airports more than larger airports, while raising passenger facility charges would help larger airports more; and (15) other initiatives, such as AIP block grants to states, have had varied success, but none appears to offer a major breakthrough in reducing the shortfall between funding and airports' plans for development.