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Airport Finance & Admin > Airport Capital Development & Funding Sources > Flashcards

Airport Capital Development & Funding Sources Flashcards

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0
Q

To ensure an airport’s long term viability, _________ _________ should be instilled, along with _____________.

A

community pride / sustainability

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1
Q

Airport development is contingent on what five factors?

A
  1. Need
  2. Available land and facilities
  3. Potential for economic gain
  4. Community support
  5. Financial resources
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2
Q

Developing specific airport property requires the airport executive consider what five things?

A
  1. Physical constraints
  2. Zoning regs.
  3. Political factors
  4. Conveyance (or use) restrictions
  5. General & contract legal counsel
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3
Q
  1. If property evaluation is satisfactory, the next step in airport development is ___________ ___________.
  2. What is the purpose?
A
  1. market analysis

2. Determines whether future demand exists for the property or facility.

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4
Q
  1. If a market analysis determines that there is future demand for the proposed airport land, what is the next step in the process?
  2. What is accomplished?
A
  1. A pro-forma economic analysis.
  2. A pro-forma is used to develop ranges of lease rates and a projection of operating expenses.

Additional cost data included are construction, loans, and other significant costs.

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5
Q
  1. Following the pro-forma, what is the final phase of development?
  2. What is accomplished by this step?
A
  1. Establishment of an operating plan.

2. Policies and procedures developed for ensuring the development is successfully and competitively managed.

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6
Q

A bond is a __________ ___________ to repay ___________ money at __________ ___________ with ____________.

A

formal contract / borrowed / fixed intervals / interest

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7
Q

Municipal securities (bonds) refer generically to _______ _______ obligations, issued by state and local gov’t entities, to finance ________ _________.

A

interest-bearing / capital costs

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8
Q

Municipal securities (bonds) can be broken down into what four categories?

A
  1. General obligation
  2. Revenue & special facility bonds
  3. Hybrid source bonds
  4. Industrial development & exempt facility bonds
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9
Q

General Obligation Bonds

  1. Who issues?
  2. What makes them attractive to bond purchasers?
  3. What is a key advantage to the issuer?
A

GO Bonds

  1. Issued by states, municipalities, or other approved gov’t’s
  2. Usually require voter approval to back with the full faith and credit of the issuer to meet debt service requirements
  3. Key advantage is issued at lower interest rate than other bonds due to community guarantee, thus lower risk.
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10
Q

Revenue Bonds

  1. Who issues?
  2. Characteristics?
  3. Key advantage?
A
  1. Authorized gov’ts such as states, local, airport authorities, etc.
  2. Based on the idea that facilities paid for by those that use them and are backed by the revenue of issuing agency.
  3. Advantage of Revenue Bonds over Gen Oblig Bonds is their issuance over a longer period (25 - 30 yr terms), resulting in lower monthly debt payments. Rev Bonds have enabled airports to finance many projects.
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11
Q

Airport Revenue Bonds (ARB)

  1. Who issues?
  2. Characteristics?
  3. Why issued?
  4. Risks?
A
  1. Issued by city, state, or airport authority.
  2. Tax-exempt based on general airport revenues or lease payments by airlines.
  3. Used to fund expansions or current operations
  4. Risk is contingent on well being of privately held companies that make lease payments or contribute a percentage of revenue to the airport.
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12
Q

Special Facility Bonds are the same as Airport Revenue Bonds except for what?

A

Secured by the specific airport facility financed rather than the airport’s general revenue fund.

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13
Q

Hybrid Source Bonds

  1. Characteristics?
  2. Issuer obligation expectations?
A
  1. Airport Revenue Bonds combined with other types of bonds, PFC, or CFC funds.
  2. Issuer’s full faith and credit is behind the bonds but it is expected that facility generated revenues will cover all reqmts.
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14
Q

Industrial Development Bonds / Exempt Facility Bonds

  1. Uses?
  2. Characteristics?
  3. Advantages?
A
  1. Special type of revenue bond designed for small airports.
  2. Issued to finance facilities that are then leased to the private entity for which the facilities are financed. No assurances made by issuing gov’t. Legally complicated to issue.
  3. Private entity users receive tax-exempt financing for making a capital investment.
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15
Q

What studies are required to market a bond to finance a proposed airport facility?

A

Feasibility and Financial Study

16
Q

What is the purpose of a bond rating?

A

Ratings help determine whether debt will be paid in a full and timely manner. Rating agencies should be providing an impartial assessment of investment protection.

17
Q

The review of a bond proposal consists of ____________ and ______________ reviews.

A

informal / formal

18
Q
  1. Of General Obligation Bonds and Revenue Bonds, over which does airport management have the greatest potential of influencing bond ratings?
  2. Why?
A
  1. Revenue Bonds
  2. With G. O. Bonds, there can be little influence over the municipality issuing the bond. Whereas, Revenue Bond ratings can be directly influenced by management policies and practices.
19
Q

What factors go into rating revenue bonds?

A
  1. economic
  2. legal
  3. financial
  4. operational
  5. political
  6. management’s
    • experience with large projects and financial planning
    • relations with airport tenants
    • handling of public issues
20
Q
  1. How and when was the Airport and Airway Trust Fund established?
  2. Why?
A
  1. Airport and Airway Revenue Act of 1970
  2. Instead of general Treasury revenues being used to develop airports, creation of the trust fund established user charges (taxes) that were assessed on those actually using and benefiting from them.
21
Q
  1. The Airport and Airways Trust Fund taxes come from what three sources?
  2. How were these funds to be managed to remain viable?
A
  1. Fees were added to passenger tickets, cargo waybills, and non-commercial aviation fuel.
  2. Self-financed on a pay as you go basis so deficit proof with expenditures limited to receipts.
22
Q

For what purpose is the Airport and Airways Trust Fund slated?

A

Finance R & D projects, FAA capital improvement programs such as AIP grants, and modernization of ATC facilities

23
Q

What airports are eligible under the Airport Improvement Act, which led to the Airport Improvement Program (AIP), for grants?

A

Public-use airports that are included in the National Plan of Integrated Airports System (NPIAS)

24
Q
  1. AIP grants can be issued for what three broad purposes?

2. Where is guidance for the administration of the AIP process found?

A
  1. Airport Planning (individual or area-wide), Airport Development, and Noise Compatibility Projects
  2. FAA Order 5100.38C, known as the AIP Handbook
25
Q

AIP grants are divided into what three fund categories?

A

Entitlement, Discretionary, and Set-aside Funds

26
Q

Describe AIP Entitlement Funds.

A

Entitlements are determined by a formula based on pax boardings and cargo tonnage handled for primary airports. Approx. 20% of remaining entitlement funds go to non-primary, GA, and reliever airports.

27
Q

Describe AIP Discretionary Funds.

A

Two types: set-asides and capacity/safety/security/noise (CSSN) are for primary and reliever airports and make up 75% of the discretionary funds. The remaining 25% are truly discretionary for any eligible airport project.

Based on a national priority system. Airport must be able to start work within the same fiscal year awarded, or within six months, whichever is later.

28
Q

Describe AIP Set-aside Funds

A

Set-aside funds are open to all NPIAS airports for funding specifically defined congressional mandates. They are designed to achieve funding minimums for noise compatibility and clean air, military airport conversion, and GA reliever needs.

29
Q

What studies are required to market a bond to finance a proposed airport facility?

A

Feasibility and Financial Study

30
Q

What is the purpose of a bond rating?

A

Ratings help determine whether debt will be paid in a full and timely manner. Rating agencies should be providing an impartial assessment of investment protection.

31
Q

The review of a bond proposal consists of ____________ and ______________ reviews.

A

informal / formal

32
Q
  1. Of General Obligation Bonds and Revenue Bonds, over which does airport management have the greatest potential of influencing bond ratings?
  2. Why?
A
  1. Revenue Bonds
  2. With G. O. Bonds, there can be little influence over the municipality issuing the bond. Whereas, Revenue Bond ratings can be directly influenced by management policies and practices.
33
Q
  1. At what level of the FAA does the grant process normally occur?
  2. What must airport executives be careful of when dealing with FAA personnel regarding grants
A
  1. Regional / Field Level Airport District Offices (ADO)
  2. Airport executives and private entities must be careful of violating CFR Title 49, Part 20 that prohibits lobbying or attempting to influence federal employees. Discussions about airport priorities are however, acceptable.
34
Q

How are funds issued to the AIP?

A
  • Congress appropriates funds every 3 - 4 years. Last done with the FAA Modernization & Reform Act of 2012 following many continuing resolutions.
  • Entitlement Funds issued first
  • Discretionary Funds are distributed by Office of Mgmt and Budget (OMB). Allows FAA to obligate Congressional apportionments with a financial plan.
  • Sponsors notified of allocation after project fully processed, yet no actual xfr of funds.
  • When grant agreement executed, US Gov’t obligated to pay grant specified amount through FAA acctng offices in two steps.
    a. Reservation of funds until grant signed
    b. Obligation once grant signed followed by payment

Airport Finance & Admin (9 decks)

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