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ACE Airport Finance > Module 3: Airport Capital Development > Flashcards

Module 3: Airport Capital Development Flashcards

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1
Q

This is a long-range planning document intended to evaluate current facilities and aviation demand, forecast future demand and evaluate and select future facility development that will provide adequate capacity to meet the forecast demand, as well as safety considerations.

A

Airport Master Plan

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2
Q

This serves as the primary planning tool for systematically identifying, prioritizing, and assigning funds to critical airport development and associated capital needs for the National Airspace System (NAS).

A

Airport Capital Improvement Plan (ACIP)

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3
Q

This formula scores projects for the purposes of allocating AIP discretionary grants.

A

National Priority Rating

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4
Q

Airport capital projects are subject to federal environmental review under what?

A

National Environmental Policy Act (NEPA) of 1969

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5
Q

Name the five actions that trigger a federal review under NEPA.

A
  1. Approval of any federal funding for airport planning and development projects.
  2. Approval of an updated ALP.
  3. Approval of a PFC application.
  4. Approval of an airport’s Part 139 operating certificate.
  5. Approval of an airport’s Part 150 noise compatibility plan.
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6
Q

Part of the internal CIP, the intent of this is to reduce design and construction risk by providing schematic design documents to use as the primary input to the Design phase. It’s also intended to result in more reliable initial cost estimates for the project.

A

Program Definition

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7
Q

What are the two primary cost estimation methods utilized in the industry?

A
  1. Use of historical bid prices
  2. Cost-based estimating using unit costs of materials and other work components.
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8
Q

What are the four most common types of project budget contingencies?

A
  1. Design contingency
  2. Construction contingency
  3. Owner’s contingency
  4. Inflation contingency
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9
Q

What are the three traditionally utilized project delivery processes?

A
  1. Design-Bid-Build (DBB) approach
  2. Construction Manager at Risk (CMAR) approach
  3. Design-Build (DB) approach
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10
Q

This common financial target measures relative affordability for airlines of an airport’s rates, fees, and charges.

A

Airline cost per enplaned passenger (CPE)

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11
Q

This common financial target measures net cash flows available for debt service and the relative “cushion” provided by the net cash flow in the event of a downturn.

A

Debt service coverage ratio

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12
Q

This common financial target measures an airport operator’s indebtedness relative to its ability to generate revenues through its key output measurement (i.e. passengers).

A

Leverage ratios (debt per enplaned passenger and debt per O&D passenger)

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13
Q

This common financial target measures ability of airport operator to withstand periodic disruptions in revenue.

A

Liquidity (days cash on hand)

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14
Q

What legislation established the Airport and Airway Trust Fund?

A

Airport and Airway Development Act of 1970.

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15
Q

What are the six forms of grants distributed under AIP?

A
  1. Entitlement grants
  2. Discretionary grants
  3. Small airport funds
  4. Set aside funds
  5. State apportionments
  6. Non-primary apportionments
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16
Q

What is the minimum and maximum allocation to any primary airport issued under entitlement grants?

A

$1 million
$26 million

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17
Q

This federal legislation prevented state or local agencies from implementing taxation on passengers.

A

Airport Development Acceleration Act of 1973, also called the “Anti-Head Tax Act”

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18
Q

What legislation authorized the current PFC structure?

A

Wendell Ford Aviation Investment and Reform Act for the 21st Century (AIR-21)

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19
Q

PFC eligible projects must meet one of what three criteria?

A
  1. Preserve or enhance the capacity, safety, or security of the national air transportation system
  2. Reduce the effects of aviation noise
  3. Provide opportunities for enhanced competition between or among air carriers
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20
Q

What are the steps of the typical PFC application process?

A
  1. Program Formulation and Project Selection
  2. Written Notice to Air Carriers (or Notice of Intent)
  3. Air Carrier Consultation Meeting and Certification
  4. Notice and Opportunity for Public Comment
  5. Advance Coordination with FAA
  6. Final Application Submission
  7. Application Review Period
  8. Application Approval
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21
Q

Name the 7 “attachments” of the PFC application.

A

Attachment A - ACIP
Attachment B - Project Information
Attachment C - Air Carrier Consultation and Public Notice Information
Attachment D - Request to Exclude Class(es) of Carriers
Attachment E - Alternative Uses/Projects
Attachment F - Competition Plan/Update
Attachment G -ALP/Airspace/Environmental
Attachment H - Notice of Intent Project Information

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22
Q

Who collects the PFCs and how often are they remitted?

A

Airlines collect PFCs on behalf of the airport operators and remit them monthly.

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23
Q

TSA grants are funded through letters of intent or _______________________________.

A

Other Transaction Agreements (OTAs)

24
Q

TSA grants can be used for what activities?

A
  1. Install baggage conveyer systems related to aviation security.
  2. Reconfigure terminal baggage areas as required to install explosive detection systems.
  3. Deploy explosive detection systems behind the ticket counter, in the baggage sorting area or in line with the baggage handling system
25
Q

These fees fund developments related to rental car operations, primarily consolidated rental car facilities (CONRACs).

A

Customer Facility Charges (CFCs)

26
Q

These types of projects are typically funded through long-term concession agreements as Design Build Finance Operate Maintain (DBFOM).

A

Public-Private Partnership (P3) agreements

27
Q

The tax-exempt status of these types of bonds, including airport revenue bonds, results in attractive interest rates for borrowers such as airports, as investors are willing to accept the lower interest rates because the interest paid is largely exempt from tax.

A

Municipal Bonds (“munis”)

28
Q

Under the provisions of this, certain income and deduction line items are subject to an “alternative minimum” tax calculation to combat tax avoidance schemes.

A

Alternative Minimum Tax (AMT)

29
Q

What is the requirement for a public hearing on proposed tax-exempt bond issuances called?

A

TEFRA Hearing (“TEFRA” from the Tax Equity and Fiscal Responsibility Act of 1982)T

30
Q

This is a security promising the repayment of principal at a certain time with periodic interest payments.

A

a bond

31
Q

Bonds sold at a price higher than their par value are considered to be sold at what? And bonds sold at a price lower than their par value?

A

A premium.
A discount.

32
Q

The net rate of return on a bond, considering both its coupon rate and price, is known as what?

A

Yield

33
Q

As an indicator of market conditions at any snapshot in time, the market refers to the yield curve for this index as the benchmark for tax-exempt interest rates.

A

Municipal Market Data (MMD)

34
Q

These types of bonds have a predetermined or fixed interest rate that does not change over the life of the bond.

A

Fixed-rate bond

35
Q

These types of bonds have floating coupon rates that are adjusted at periodic intervals.

A

Variable-rate bonds

36
Q

What are two examples of short-term debt instruments?

A

commercial paper and bond anticipation notes (BANs)

37
Q

This legislation reorganized the financial regulatory system, eliminating the Office of Thrift Supervision, assigning new jobs to existing agencies similar to the Federal Deposit Insurance Corporation, and creating new agencies like the Consumer Financial Protection Bureau (CFPB).

A

Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

38
Q

This organization summarizes its role as preventing fraud and manipulation and promoting fair dealing, supporting equal access to information and market transparency, and improving market understanding with educational resources.

A

Municipal Securities Rulemaking Board (MSRB)

39
Q

This core rule of the MSRB is the obligation of dealers and municipal advisors to deal fairly with all persons and not engage in any deceptive, dishonest, or unfair practices in the conduct of their municipal securities and municipal advisory activities.

A

Fair Dealing (MSRB Rule G-16)

40
Q

This core rule of the MSRB is the requirement for a dealer to have reasonable grounds for believing that a recommendation made to an investor is suitable for the investor.

A

Suitability (MSRB Rule G-19)

41
Q

This core rule of the MSRB is the establishment of core standards of conduct for municipal advisors, including their obligations related to their fiduciary duty to municipal entity clients.

A

Standards of Conduct (MSRB Rule G-42)

42
Q

This core rule of the MSRB is the requirement that prices, commissions and any mark-up or mark-down (a form of dealer compensation) dealers charge to investors must be fair and reasonable.

A

Fair Pricing (MSRB Rule G-30)

43
Q

This core rule of the MSRB is the requirement that dealers seek the most favorable terms reasonably available for their retail customers’ transactions.

A

Best Execution (MSRB Rule G-18)

44
Q

This core rule of the MSRB is the requirement for dealers to provide customer confirmations that include information about the transaction, attributes of the security, the amount of any commission and the amount of any mark-up or mark-down for certain trades.

A

Dealer Compensation (MSRB Rule G-15)

45
Q

This core rule of the MSRB is the requirement for dealers to disclose to customers all material information known (or available from an established industry source) about a transaction and security at or prior to the time of trade.

A

Time-of-Trade Disclosure (MSRB Rule G-47)

46
Q

What are the certifications the MSRB requires on municipal securities professionals?

A

Series 50 for municipal advisor representatives and Series 52 for municipal securities representatives.

47
Q

Bond issuances authorized by municipalities or sovereign governments.

A

bond ordinance or indenture

47
Q

What are the five important provisions of a bond ordinance intended to protect bondholders?

A
  1. Rate Covenant
  2. Flow of Funds
  3. Definition of Revenues, Expenses and Debt Service Requirements
  4. Additional Bond Test
  5. Debt Service Reserve Requirements
48
Q

Who are the typical key participants in the bond issuance process?

A

Issuer, Financial (or Municipal) Advisor, Underwriter, Bond Counsel, Underwriter’s Counsel, Feasibility Consultant, Rating Agencies

49
Q

What are the four credit rating agencies that evaluate airport credit?

A

Moody’s Investors Service, S&P Global, Fitch Ratings, and Kroll Bond Rating Agency

50
Q

The rating agency is said to take a this, if a proposed bond sale obtains a rating different than the existing issuer rating.

A

ratings action

51
Q

This is specific to the particular bond issued and stipulates the information that is required to be shared with investors annually.

A

Continuing Disclosure Agreement (CDA)

52
Q

What are two common financial (forecasting) models used by airports?

A

long-term financial forecasting and airline rates and charges models

53
Q

This refers to the practice of taking advantage of price discrepancies in different markets to make a profit with little to no risk.

A

arbitrage

54
Q
A

ACE Airport Finance (5 decks)

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