ACSG, Inc. - Connor Addresses AAAE

Connor Addresses AAAE

ACSG Vice President William (Bill) Connor, AAE, addressed the recent 74th Annual AAAE Conference and Exposition in Dallas on issues relating to Passenger Facility Charges (PFC). The following is a summary of his presentation.

As his scheduled co-speaker was Barry Molar, Manager of the FAA’s Financial Assistance Division, Connor chose a unique approach to the typical PFC update. His presentation was entitled “The Real World of PFC’s” and dealt with actually moving an application from conception through the carrier consultation and FAA approval process.
Connor began with the airport’s internal process for determining Capital Improvement Program (CIP) needs. The options available for the use of PFC’s as an important component of available funding mechanisms were addressed. He stressed the need for developing a “Strategic Financial Plan” which addresses all CIP projects, determines the accuracy of cost estimates, finalizes project priorities and presents detailed funding options. “The Strategic Financial Plan will provide airport management with a critical tool for presenting the program to the airport’s board or other governing body for final approval. This step can prove essential if the airport is considering an increase to $4.50,” Connor indicated.

He then discussed the situations in which an airport would need outside consulting assistance. If the airport determines that assistance would be beneficial, he stressed how important it is for the airport to select a consulting firm that considers PFC’s to be a high priority specialty, in and of itself, and not just a tag on activity. “Having a specialist in PFC’s within the selected consulting firm will ensure a more satisfactory result,” affirmed Connor.

Connor emphasized the importance of extensive and ongoing PFC experience when dealing with the FAA and emphasized that it is critical during the carrier consultation process. “Experienced PFC consultants can alert the airport to potential problem projects, for either the FAA or the carriers, and help the airport present these projects in a manner which will eliminate or minimize opposition. This is especially important if the airport is contemplating PFC funded projects that are related to air cargo or general aviation. Although the carriers always object to projects in these categories, a well developed CIP and thorough justification can minimize carrier opposition and assure FAA approval.”

Connor further considered community attitudes toward the airport’s levy of a PFC, especially if the airport is contemplating an increase to the $4.50 level. “If the community is already sensitive to the levy of a PFC, it is important that the increase is justified by the projects to be accomplished for an additional $1.50 per passenger. Otherwise, the community might view the increase as a 50 % increase to passenger taxes. This is easiest to accomplish if a majority of the projects are highly visible and directly beneficial to the passenger such as a terminal expansion or renovation. In these cases, an effective public information program will alleviate negative pressure that may be exerted by the public and politicians on airport staff,” Connor stated.
Connor then reviewed air carriers’ concerns and the FAA approval criteria for projects proposed at the $4.50 level. He indicated that justifications must be thoroughly developed and accompanied by a sound CIP or strategic capital financial plan. “In some instances, the FAA has approved projects receiving carrier opposition at the $3.00 level rather than $4.50 due to the differences in approval criteria. Having a mixture of $3.00 and $4.50 projects ongoing simultaneously is allowable, but it will create accounting difficulties, which are best avoided,” Connor indicated.
Connor closed his presentation by summarizing two projects that he personally supervised. Both of the clients were small hub/non-hub category airports. Each of the CIPs included a major terminal expansion/renovation and an extension of the crosswind runway.

In the first case, the airlines concurred with the importance of all projects and the process went very smoothly. Their approval included a crosswind runway extension, which the FAA had determined was eligible but not justifiable. Due to the air carrier support of the runway extension, the FAA reconsidered its position. Upon ACSG’s completion of a detailed study to determine the required new length for the crosswind runway, the FAA approved the project and provided discretionary Airport Improvement Program (AIP) funds for the program which originally was expected to require 100% PFC and local funding.

In the second case, one airline strongly objected to all of the terminal work and the runway extension. Other carriers provided specific support for the runway extension, and all of the carriers, except the one airline, supported the terminal work with some minor design concerns. Extensive additional work was required to fully justify the terminal renovation/expansion including a new and more detailed Terminal Area Study. Following this effort, the FAA approved all components of the terminal work even though one carrier continued its intense opposition. The approved project included an inter-modal transportation facility. This part of the project was partially funded with a TEA-21 grant.

The FAA again expressed the opinion that the crosswind runway extension was eligible but not justifiable. Because of air carrier opposition, the FAA advised airport management that it would be unable to approve the project for PFC or AIP funding. The runway extension was withdrawn from the PFC application and successfully funded through an FAA Letter of Intent. Although this resulted in funding through AIP entitlement and discretionary funds totaling approximately $28 million, approval was received only after ACSG completed a detailed project justification as part of the LOI application process. This justification also included a thorough analysis of alternatives and a very complex Benefit Cost Analysis (BCA).

For more information on PFCs, do not hesitate to contact Mr. Connor in ACSG’s Colorado Springs office at (719) 570-4690 or email at wconnor@ACSGinc.com.

05-02 Dallas, TX, Naperville, IL