There are five major sources of airport capital development funding: the federal Airport Improvement Program (AIP); local passenger facility charges (PFCs) imposed pursuant to federal law; tax-exempt bonds; state and local grants; and airport operating revenue from tenant lease and other revenue-generating activities such as landing fees. Federal involvement is most consequential in AIP, PFCs, and tax-exempt financing.The AIP has been providing federal grants for airport development and planning since the passage of the Airport and Airway Improvement Act of 1982 (P.L. AIP funding is usually spent on projects that support aircraft operations such as runways, taxiways, aprons, noise abatement, land purchase, and safety or emergency equipment. The funds obligated for AIP are drawn from the airport and airway trust fund, which is supported by a variety of user fees and fuel taxes.

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Different airports use different combinations of these sources depending on the individual airport’s financial situation and the type of project being considered. Although smaller airports’ individual grants are of much smaller dollar amounts than the grants going to large and medium hub airports, the smaller airports are much more dependent on AIP to meet their capital needs. This is particularly the case for noncommercial airports, which received over 25% of AIP grants distributed in FY2018. Larger airports are much more likely to issue tax-exempt bonds or finance capital projects with the proceeds of PFCs.The FAA Reauthorization Act of 2018 (P.L. 115-254) provided annual AIP funding of $3.35 billion from the airport and airway trust fund for five years from FY2019 to FY2023. The act left the basic structure of AIP unchanged, but authorized supplemental annual funding of over $1 billion from the general fund to the AIP discretionary funds, starting with $1.02 billion in FY2019, and required at least 50% of the additional discretionary funds to be available to nonhub and small hub airports. SummaryThere are five major sources of airport capital development funding: the federal Airport Improvement Program (AIP); local passenger facility charges (PFCs) imposed pursuant to federal law; tax-exempt bonds; state and local grants; and airport operating revenue from tenant lease and other revenue-generating activities such as landing fees.

Federal involvement is most consequential in AIP, PFCs, and tax-exempt financing.The AIP has been providing federal grants for airport development and planning since the passage of the Airport and Airway Improvement Act of 1982. AIP funding is usually spent on projects that support aircraft operations such as runways, taxiways, aprons, noise abatement, land purchase, and safety or emergency equipment. The funds obligated for AIP are drawn from the airport and airway trust fund, which is supported by a variety of user fees and fuel taxes. Different airports use different combinations of these sources depending on the individual airport's financial situation and the type of project being considered. Although smaller airports' individual grants are of much smaller dollar amounts than the grants going to large and medium hub airports, the smaller airports are much more dependent on AIP to meet their capital needs. This is particularly the case for noncommercial airports, which received over 25% of AIP grants distributed in FY2018. Larger airports are much more likely to issue tax-exempt bonds or finance capital projects with the proceeds of PFCs.The FAA Reauthorization Act of 2018 provided annual AIP funding of $3.35 billion from the airport and airway trust fund for five years from FY2019 to FY2023.

The act left the basic structure of AIP unchanged, but authorized supplemental annual funding of over $1 billion from the general fund to the AIP discretionary funds, starting with $1.02 billion in FY2019, and required at least 50% of the additional discretionary funds to be available to nonhub and small hub airports. IntroductionThe federal government supports the development of airport infrastructure in three different ways.

First, the Airport Improvement Program (AIP) provides federal grants to airports for planning and development, mainly of capital projects related to aircraft operations such as runways and taxiways. Second, Congress has authorized airports to assess a local passenger facility charge (PFC) on each boarding passenger, subject to specific federal approval. PFC revenues can be used for a broader range of projects than AIP funds, including 'landside' projects such as passenger terminals and ground access improvements. Third, federal law grants investors preferential income tax treatment on interest income from bonds issued by state and local governments for airport improvements (subject to compliance with federal rules). Airports may also draw on state and local funds and on operating revenues, such as lease payments and landing fees.A federal role in airport infrastructure first developed during World War II. Prior to the war, airports were a local or private responsibility, with federal support limited to the tax exclusion of municipal bond interest.

National defense needs led to the first major federal support for airport construction. After the war, the Federal Airport Act of 1946 (P.L. 79-377) continued federal aid, although at lower levels than during the war years. Initially, much of this spending supported conversion of military airports to civilian use. In the 1960s, substantial funding also was used to upgrade and extend runways for use by commercial jets.In 1970, Congress responded to increasing congestion, both in the air and on the ground at U.S. Airports, by passing two laws. The first, the Airport and Airway Development Act, established the forerunner programs of AIP: the Airport Development Aid Program and the Planning Grant Program.

The second, the Airport and Airway Revenue Act of 1970, dealt with the revenue side of airport development, establishing the Airport and Airway Trust Fund (AATF, also referred to as the Aviation Trust Fund, and in this report, the trust fund). The Airport and Airway Improvement Act of 1982 (; the 1982 Act) created the current AIP and reactivated the trust fund. Annual AIP Authorizations and Amounts Made Available for Grants, FY2000-FY2023($ millions, in nominal dollars)Fiscal YearAuthorizationGrant Amounts Available2000$2,475$1,8512001$3,200$3,1402002$3,300$3,2232003$3,400$3,2952004$3,400$3,2942005$3,500$3,3842006$3,600$3,4242007$3,700$3,4022008$3,675$3,4712009$3,900$3,3852010$3,515$3,3782011$3,515$3,3782012$3,350$3,1992013$3,350$3,1922014$3,350$3,1942015$3,350$3,1932016$3,350$3,1922017$3,350$3,1862018$3,350$3,1802019$3,350NA2020$3,350NA2021$3,350NA2022$3,350NA2023$3,350NA.

Sources: FAA, AIP Annual Report of Accomplishments, 201 2-2013, and data from FAA Airports Branch. Amounts made available for grants do not include obligations used for administration expenses, the Small Community Air Service Program, and some research funding.After trending upward from FY1982 to FY1992, grant funding approved in annual appropriations declined through the mid-1990s as part of federal deficit reduction efforts, leaving large gaps between authorized AIP spending levels and the amounts the program was actually allowed to expend. This occurred despite provisions in place since 1976 designed to ensure that federal capital spending for airports is fully funded at the authorized level (see Text B ox).The Wendell H. Ford Aviation Investment and Reform Act for the 21 st Century (AIR21; ), enacted in 2000, provided major increases in AIP's authorization, starting in FY2001.

During FY2001-FY2006 AIP was funded near its fully authorized levels. The amount available for grants peaked at $3.47 billion in FY2008. From FY2008 through FY2011, when AIP was authorized by a series of authorization extension acts, appropriators set the program's annual obligation limitation at $3.515 billion. The 2012 FAA Modernization and Reform Act authorized funding through FY2015 at an annual level of $3.35 billion.

In July 2016, the FAA Extension, Safety, and Security Act of 2016 was passed to further extend the authorization of AIP at the annual level of $3.35 billion through September 30, 2017. Release of Airport Obligations Regarding LandAll AIP land grants include the obligation to operate the airport property as an airport in perpetuity. Changes in use of airport property to nonaviation purposes require an FAA release from federal obligations. The prime concern during FAA's consideration of the release request is the benefit of the change to civil aviation. An airport sponsor that has entered into an AIP grant after December 30, 1987, must dispose of land at fair market value if it is no longer needed for airport purposes. The treatment of the proceeds from the sale of land differs, depending on whether the land grant was for noise compatibility purposes or non-noise airport improvements.

For the disposition of noise-related land purchases the federal proceeds are proportionate to the federal share of the acquisition cost. At the discretion of the Secretary of Transportation, the money may be reinvested in another project at the airport or transferred to another eligible airport.

An airport sponsor may dispose of non-noise-related land purchased under an airport development grant at fair market value, provided the proceeds are expended for airport purposes. Alternatively, the airport may reimburse FAA a proportionate share of the fair market value of the land based on the federal share of the original acquisition cost.

The federal proceeds are to be reinvested at the airport or transferred to another eligible airport as prescribed by the Secretary.In all cases, the Secretary is to give preference to the following in descending order:1. Reinvestment in an approved noise compatibility project;2. Reinvestment in an approved project eligible under the discretionary fund special apportionment category set-asides (49 U.S.C.

§47117 (e));3. Reinvestment in an approved project eligible under 49 U.S.C. §47114, §47115, §47117 (apportionments, discretionary fund, and use of apportioned amounts, respectively);4.

Transfer of funds to an eligible sponsor of another public airport to be reinvested in an approved noise compatibility project at that airport;5. Payment to the Secretary for deposit in the Airport and Airway Trust Fund.In the case of an airport that is to be replaced by a new or replacement airport, FAA generally treats the proposal as a trade-in of the federally assisted land and facilities at the old airport for the acquisition and development at the new or replacement airport. Otherwise, the fair market value reinvestment and reimbursement requirements apply.Passenger Facility ChargesIn 1990, federal deficits and expected tight budgets led to concerns that the Airport and Airway Trust Fund and other existing sources of funds for airport development would be insufficient to meet national airport needs. This led to authorization of a new user charge, the Passenger Facility Charge (PFC). The PFC was seen as a complementary funding source to AIP. The Aviation Safety and Capacity Expansion Act of 1990 allowed the Secretary of Transportation to authorize public agencies that control commercial airports to impose a fee on each paying passenger boarding an aircraft at their airports.

Initially, there was a $3 cap on each airport's PFC and a $12 limit on the total PFCs that a passenger could be charged per round trip.The PFC is a state, local, or port authority fee, not a federally imposed tax deposited into the Treasury. Because of the complementary relationship between AIP and PFCs, PFC provisions are generally folded into the sections of FAA reauthorization legislation dealing with AIP. The money raised from PFCs must be used to finance eligible airport-related projects. Unlike AIP funds, PFC funds may be used to service debt incurred to carry out projects.Legislation in 2000 raised the PFC ceiling to $4.50, with an $18 limit on the total PFCs that a passenger can be charged per round trip.

To impose a PFC above $3 an airport has to show that the funded projects will make significant improvements in air safety, increase competition, or reduce congestion or noise impacts on communities, and that these projects could not be fully funded by using the airport's AIP formula funds or AIP discretionary grants. Large and medium hub airports imposing PFCs above the $3 level forgo 75% of their AIP formula funds. PFCs at large and medium hub airports may not be approved unless the airport has submitted a written competition plan to FAA, which includes information about the availability of gates, leasing arrangements, gate-use requirements, controls over airside and ground-side capacity, and intentions to build gates that could be used as common facilities.The FAA Modernization and Reform Act of 2012 included minor changes to the PFC program. The act made permanent the trial program that authorized nonhub small airports to impose PFCs. The act also required GAO to study alternative means of collecting PFCs without including the PFC in the ticket price. The FAA Reauthorization Act of 2018 did not include significant changes to the PFC program and maintained the $4.50 PFC cap, with a maximum charge of $18 per round-trip flight. It did include a provision, however, that required a qualified organization to conduct a study assessing the infrastructure needs of airports and existing financial resources for commercial service airports and to make recommendations on the actions needed to upgrade the national aviation infrastructure system.Unlike AIP grants, of which over 67% in FY2018 went to airside projects (runways, taxiways, aprons, and safety-related projects), PFC revenues are heavily used for landside projects, such as terminals and transit systems on airport property, and for interest payments.

Shows the AIP grant awards and PFC approvals by project type in FY2018. Annual system-wide PFC collections grew from $85.4 million in 1992 to over $3.4 billion in 2018. Footnotes.For a general discussion of the U.S. Airport system, see Seth B. Young and Alexander R.

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Wells, Airport Planning & Management, (New York: McGraw Hill, 2011 ed.), pp. 1-95.The authorization of the trust fund had lapsed during FY1981 and FY1982. See 'Airport and Airway Development Amendments Act of 1976 ' in of this report.Government Accountability Office, Airport Finance: Information on Funding Sources and Planned Capital Development, GAO-15-306, May 20, 2015, pp. 6-11.General aviation airports do not serve military (with a few Air National Guard exceptions) or scheduled commercial service aircraft but typically do support one or more of the following: business/corporate, personal, instructional flying; agricultural spraying; air ambulances; on-demand air taxies; charter aircraft.

See for airport definitions.For detailed guidance on allowable costs under AIP, see Chapter 3 of the AIP Handbook, at.Federal Aviation Administration (FAA), Report to Congress: National Plan of Integr ated Airport System s (NPIAS) 2019 -20 23, October 2018 ( ). According to FAA, 3,321 of the 19,627 existing airports in the United States are listed in the NPIAS, 2019-2023. Unless otherwise stated, the discussion in this report refers to the NPIAS airports.For more information about the Airport and Airway Trust Fund, see CRS Report R44749, by Rachel Y. Tang and Bart Elias.O&M also receives some funding from the Treasury general fund.

Air traffic system capital maintenance and improvement falls primarily under the F&E category. The trust fund was originally both a capital account and, when excess funds existed, a user-pay system to help support FAA's administrative and operations costs.U.S. Internal Revenue Code, §§4041, 4081, 4091, 4261-4263, 4271, 9502. See also, §§1031-1032.The rates for the flight segment tax and the international arrival and departure taxes are adjusted annually.Both the international arrival and departure taxes have been adjusted for inflation (rounded to the nearest 10 cents) on an annual basis since January 1, 1999.

The rate for U.S. Flights to and from Alaska or Hawaii that applies to a domestic segment is only applied to departures and is $9.30 as of January 2019.Bureau of Transportation Statistics, Baggage Fees by Airline 2017,.The obligation limitation or limitation on obligations is used to control annual AIP spending in place of an appropriation. The obligation limitation is a limit on the total amount of AIP contract authority that can be obligated in a single fiscal year.

For practical purposes, the obligation limitation is analogous to an appropriation.See.See 49 U.S.C. Chapter 471 and FAA, Airport Improvement Program Handbook,.Passenger enplanements include originating passengers as well as those changing aircraft.In a year in which the amount made available is below $3.2 billion, the amounts apportioned to primary airports are not doubled, the minimum apportionment returns to $650,000, and the maximum apportionment is $22 million.In a year in which the amount made available is below $3.2 billion, not more than 8% of cargo service apportionment may be apportioned to any one airport.

On June 8, the U.S. Department of Transportation (DOT) 241 recipients of $677 million in Airport Improvement Program grants through the Federal Aviation Administration (FAA). This funding is the first allotment of the $3.2 billion AIP is authorized to grant for airports across the nation. These grants will fund projects that include runways, taxiways, aprons and terminals.AIP, a key priority for counties who own or operate a local airport, provides federal grants to airports for development and planning. AIP funding can support a wide range of airports, including large commercial airports and small general aviation airports.

However, commercial, revenue-producing facilities are generally ineligible for AIP funding. AIP provides funds for projects without the financial burden of debt financing, although airports are required to provide a local match between five and 25 percent, depending on the airport size and eligibility costs. Under the program, some airports are eligible for a certain amount of AIP entitlement funding each year based on activity levels and project needs. If capital project needs exceed available entitlement funds, the FAA can supplement a given airport’s entitlement funding with discretionary funding.Some county airports are included in the initial funding announcement from DOT, which can be viewed. Counties play a critical role in the nation’s air transportation and own 34 percent of the nation’s publicly-owned airports. NACo will continue working with the administration and Congress to ensure future investment into county-owned airports.