	The Size and Scope of FAA and ACI Airport Capital Estimates Differ

ACI’s estimate of planned capital development costs is considerably larger  than FAA’s because it reported a broader base of projects. According to  FAA’s estimate, which includes only projects that are eligible for AIP  grants, the total cost of airport development will be about $41 billion, or  about $8.2 billion per year for 2007 through 2011. The biggest difference stems from  ACI’s inclusion of projects that are not eligible for AIP grants, while FAA’s  estimate includes only AIP-eligible projects (see table 2). This points to differences in how the two estimates are formed. Further, the ACI estimate  includes projects that FAA does not believe will be commissioned during  the next 5 years. Airports Have Averaged About $13 Billion Annually in Capital Financing over the Last 5 Years and Use a Variety of Funding Sources

From 2001 to 2005, the 3,364 active airports that make up the national  airport system received an average of about $13 billion per year for  planned capital development from a variety of funding sources. Total Planned Development Exceeds Past Funding Levels by About $1 Billion Annually

Based on past funding levels, airports’ funding is about $1 billion per year  less than estimated planned capital development costs. The $14 billion is the sum of FAA’s estimated AIP- eligible costs of $8.2 billion annually and ACI’s estimated ineligible costs  of $5.8 billion annually. Larger Airports–-Planned Development Costs Exceed Past Funding by About $600 Million Annually

The difference between current funding and planned development costs  for larger airports is about $600 million if both AIP-eligible and ineligible  projects are considered. From 2001 through 2005, larger airports collected  an average of about $9.4 billion a year for capital development, as  compared to over $10 billion in annual planned development costs. Passenger traffic has  rebounded to 2000 levels and bond ratings have improved. Administration’s FAA Reauthorization Proposal Would Increase Funding for Larger Airports, while the Effect on Smaller Airports is Uncertain

The administration’s reauthorization proposal for AIP would increase  funding for larger airports, but its effect on smaller airports is uncertain  because of the overall reduction in AIP and the proposed changes in how  AIP grants are allocated between larger and smaller airports. As a  separate issue, the administration’s reauthorization proposal would  change the way that AIP and other FAA programs are funded and may not  provide enough monies for these programs, even at the reduced levels  proposed by the administration. Unlike previous reauthorization proposals, which  made relatively modest changes in the structure of the AIP program, this  proposal contains some fundamental changes in the funding and structure  of the AIP program. FAA officials confirmed for us that in estimating fuel tax revenues they did  not take into account possible reductions in fuel purchases due to the  increase in the tax rates. Appendix II: Scope and Methodology

To determine how much planned development would cost over the next 5  years, we obtained planned development data from the Federal Aviation  Administration (FAA) and Airports Council International-North America  (ACI).
Why GAO Did This Study

To address the strain on the aviation system, the Federal Aviation Administration (FAA) has proposed transitioning to the Next Generation Air Transportation System (NextGen). To finance this system and to make its costs to users more equitable, the administration has proposed fundamental changes in the way that FAA is financed. As part of the reauthorization, the administration proposes major changes in the way that grants through the Airport Improvement Program (AIP) are funded and allocated to the 3,400 airports in the national airport system. In response, GAO was asked for an update on current funding levels for airport development and the sufficiency of those levels to meet planned development costs. This testimony comprises capital development estimates made by FAA and Airports Council International (ACI), the chief industry association; analyzes how much airports have received for capital development and whether this is sufficient to meet future planned development; and summarizes the effects of proposed changes in funding for airport development. This testimony is based on ongoing GAO work. Airport funding and planned development data are drawn from the best available sources and have been assessed for their reliability. This testimony does not contain recommendations.

What GAO Found

ACI's estimate for planned development costs is considerably larger than FAA's, reflecting a broader range of projects included as well as differences in when and how the estimates are made. For 2007 through 2011, FAA estimated annual planned capital development costs at $8.2 billion, while ACI estimated annual costs at $15.6 billion. The estimates differ primarily because FAA's estimate only includes projects that are eligible for AIP grants, while ACI's covers all projects, including $5.8 billion for projects not eligible for federal funding, such as parking garages. From 2001 through 2005, airports received an average of about $13 billion a year for planned capital development. This amount covers all types of projects, including those not eligible for federal grants. The primary source of this funding was bonds, which averaged almost $6.5 billion per year, followed by federal grants and passenger facility charges (PFC), which accounted for $3.6 billion and $2.2 billion, respectively (see figure below). If airports continue to attract this level of funding for planned capital development, this amount would annually fall about $1 billion short of the $14 billion in total planned development costs (the sum of FAA's estimated $8.2 billion in eligible costs and the industry's $5.8 billion in ineligible costs). Larger airports foresee a shortfall of about $600 million annually, while smaller airports foresee a shortfall of $400 million annually. FAA's reauthorization proposal would reduce the size of AIP by $750 million but increase the amount that airports can collect from PFCs. However, the benefit from increased PFCs would accrue mostly to larger airports and may not offset a reduced AIP grants program for smaller airports. The proposal would also change the way that AIP and other FAA programs are funded. The new fuel taxes that FAA has proposed may not provide the revenues for AIP that FAA anticipates.