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LOI
Update: The Current Situation and Case Studies
ACSG
continues its success in assisting airports, especially small
hub/non-hub airports, in securing needed funding through this
unique and difficult process. The application for a Letter
of Intent (LOI) is a complex undertaking. This ongoing FAA
program was developed to provide a special funding mechanism
for high cost projects which have a positive impact on the
air transportation system as a whole, and for which no other
financing is feasible within an acceptable time frame. (For
the foreseeable future, these funds will be restricted to airside
projects.) The airport must demonstrate a significant local
commitment to the project. This frequently entails advance
funding of the project through bonds and dedication of all
AIP entitlement funds to the LOI project throughout the funding
period. A prior commitment of entitlements to other high priority
projects and/or completion of multi-year projects can result
in exceptions to this policy.
The airport must also present a detailed CIP and strategic financial plan,
clearly defining the allocation of all airport revenues and demonstrate a commitment
to the requested LOI project.
The vast majority of the several dozen LOI’s approved since 1988 have
gone to large or medium hub airports, with a very small number to reliever
airports. This does not mean that small or non-hub airports aren’t eligible
for LOI’s. Several have received approval for an LOI after meeting the
criteria above.
There has been some policy question over the years as to what project cost
level requires a Benefit Cost Analysis (BCA) for funding approval. Typically
the threshold was either $5M or $10M depending upon airport size. When applied
to LOI’s the question is really moot, as a project of less than $10M
would not likely be funded through an LOI. High priority projects below this
level are still best coordinated through the local ADO and FAA Region as a
multi-year AIP project with significant discretionary funds. With one exception,
all LOI funded projects require an extensive BCA. The only exception is the
reconstruction, involving no increase in length, of the primary runway at a
small hub or smaller airport.
The process can be quite time consuming so any airport contemplating an LOI
needs to determine eligibility and begin the application process long before
the project is scheduled for construction. Applications must be reviewed at
the ADO and regional level and forwarded to FAA headquarters by March 1st of
the year in which the request is made. Upon approval, funds will become available
in the following fiscal year beginning October 1st. An LOI application not
only requires approval at FAA headquarters level, it must also be published
in the Federal Register. However, an LOI can be an essential tool in an airport’s
ability to fund critical capital needs.
In addition to a determination of eligibility, ACSG can assist airports in
deciding whether an LOI is the most viable funding option. FAA has developed
LOI’s as a last resort funding methodology and the parameters for approval
are detailed and quite narrow.
ACSG has assisted clients in securing LOI funding for primary runway reconstructions,
extension of a crosswind runway, construction of parallel taxiway systems,
installation of an Engineered Material Arresting System (EMAS) and ILS installation.
Approval of all but one of these projects required the preparation of detailed
BCA’s and extensive personal coordination with FAA representatives at
the district, regional and headquarters level. Final review of BCA’s
are commonly not conducted by the FAA Airports Office but in the Policy and
Procedures Branch. |
