PFC Program Update: Eligibility Refinements, Supporting the PFC Increase, and Preparing for the Future ACI FINANCE COMMITTEE Presented by Nora Richardson April 20, 2015
Agenda Eligibility Refinements New AIP handbook and upcoming PFC handbook Are you doing the minimum necessary? Does everything need a CATEX? Existing PFC approvals revised to new standards Supporting the PFC increase Helping ACI with talking points Airline opposition to PFC increase Preparing for the future If PFC level increases, is your airport ready? 1 PFC Program Update
Eligibility Refinements 2 PFC Program Update
New AIP Handbook Issued 9/30/2014 Updates and provides clarification on AIP, and therefore PFC, eligibility of projects While new AIP Handbook was intended to clarify already existing provisions, some discretion was removed from local ADO and Regions Nationwide tendency to view things not explicitly allowed as ineligible Handbook cannot cover every possible scenario at an airport New PFC handbook in process 3 PFC Program Update
Are you doing the minimum necessary? AIP and PFC eligibility becoming more restrictive to projects that are the minimum necessary to achieve the objective TSA and CBP letters of support need to state that airports are doing the minimum necessary to meet Part 1542 plans and international processing requirements ARFF and snow removal equipment that had previously been purchased with AIP and PFC, that is now viewed in excess of minimum necessary, will now need to be purchased with airport funds 4 PFC Program Update
Does everything need a CATEX? ARP Standard Operating Procedure CATEX Determinations, effective October 1, 2014 indicates that every project financed with AIP and/or PFC funding needs a formal CATEX PFC program allows reimbursement of historical projects FAA tentative about issuing retroactive CATEX for historical projects that wouldn t have necessitated them Replacement of FIDS monitors in terminal Roof replacement PFC consulting fees Certain instances of grace period, but without clear guidance, reimbursement window might be closing? 5 PFC Program Update
Existing PFC approvals revised to new standards Existing, historical PFC approvals are being revisited based on refined standards in amendment process Just because it was approved for PFC s historically, doesn t mean that FAA won t revisit as part of an amendment Be sure that you are clear about the scope of the amendment Revising costs? Revising scope? Revising eligibility? 6 PFC Program Update
Supporting the PFC Increase 7 PFC Program Update
Legislative Priorities for the PFC Program Increase the PFC cap from $4.50 to $8.50 to restore its purchasing power Eliminate the significant contribution eligibility distinction Eliminate eligibility distinctions Consider projects for preservation of capacity as meeting significant contribution 8 PFC Program Update
Increase the PFC cap from $4.50 to $8.50 to restore its purchasing power Increase the PFC to $8.50 to restore its purchasing power immediately Devise and secure approval for a way to increase the cap on a regular basis i.e., tie to an index with annual or set adjustments Options include PPI, CCI, inflation, ENR construction cost index etc. 9 PFC Program Update
PFCs Now Imposed by Most at $4.50 Level Number of Airports Imposing a PFC by Level 299 0 Actual $4.00 or $4.50 Actual $3.00 or Below 310 311 314 325 328 328 335 346 345 353 356 356 357 102 153 192 213 236 251 273 296 303 319 330 332 334 299 208 158 122 112 92 77 62 50 42 34 26 24 23 2001 2002 2003 2004 2005 2006 Source: FAA, PFC Branch, as of January 1 of each year. 2007 2008 2009 2010 2011 2012 2013 2014 10 PFC Program Update
PFC Outlook: Future Collections Obligated to Past Projects PFC Collections by Year (in billions) 3.0 2.5 2.0 PFC Collections: $90.1 billion approved $44.0 billion collected through 2014 $46.1 billion of future collections already obligated 1.9 2.1 2.0 2.2 2.9 2.9 2.6 2.5 2.7 2.7 2.8 2.8 2.8 1.5 1.4 1.5 1.6 1.6 1.0 0.8 1.0 1.1 1.2 0.5 0.5 0.0 0.1 19921993199419951996199719981999200020012002200320042005200620072008200920102011 201220132014 Source: FAA, PFC Branch, as of May 2014. 11 PFC Program Update
Diminished Purchasing Power of PFC 12 PFC Program Update
Eliminate Significant Contribution Eligibility Distinction Eliminate eligibility distinctions Better define eligibility criteria Consider projects for preservation of capacity as meeting significant contribution Allow greater flexibility for expenditures include general planning, design, enabling projects, rehab & repair projects 13 13 PFC Program Update
How can you help ACI and AAAE in their efforts? Need examples of projects that aren t being built due to lack of PFC increase How has diminished purchasing power of PFC hurt your airport? Increased airline rates and charges PFC-eligible debt being paid with airline and nonairline revenues Hindering competitive enhancements and air service marketing 14 PFC Program Update
Sample Airport Press Telling the Right Message RDU RDU CEO: We need money to maintain the airport Do not have enough money to maintain the $1.5 billion in assets it has Seeking help from federal government to open up the revenue stream for airport Hundreds of airport directors identified PFC as solution. PFC has not changed since 2000. CMH Fee increase makes sense: Per-ticket charge is vital to pay for airport improvements Anyone who has traveled through Port Columbus recently has seen passenger facility charges, or PFCs, at work. It s disingenuous to argue that people will curtail flying because of a few-dollar increase. 15 PFC Program Update
Airline Opposition to PFC Increase Airline Talking Point: Would rather pay for projects through increased landing fees and terminal rentals than increased PFC Is this consistent with airport experience? Airline Talking Point: Strong historical track-record of paying for needed capital projects $90 billion of those projects were paid by PFCs, and that funding source is largely tapped out Airline Talking Point: Increase in per-passenger charges will suppress demand for air travel Have ancillary fees depressed demand for air travel? 16 PFC Program Update
Preparing for the Future 17 PFC Program Update
Prepare Your Airport for PFC Increase Existing Thresholds $3.00 needs to meet normal justification requirements $4.50 needs to meet significant contribution for large and mediumhub airports Future Thresholds No clear trends legislatively on where significant contribution threshold will end up Make sure existing PFC approvals can deal with any future eventuality! 18 PFC Program Update
Prepare Your Airport for PFC Increase Existing Thresholds Future Thresholds?!?! $8.50 $8.50 $5.50 65% $4.50 $4.50 $1.50 33.3% $3.00 $3.00 66.7% $3.00 $3.00 35% Label 19 PFC Program Update Label
Prepare Your Airport for PFC Increase Guidance varies by region Trend is that once a project has been rejected for significant contribution cannot try again at a later date If initially applied for at $3.00 level, can amend again to increase to significant contribution Maximize significant contribution projects in initial application Hard to obtain significant contribution for historical projects Once an application is already approved for a high level of significant contribution, only have to amend for level, not eligibility 20 PFC Program Update
Questions? 21 PFC Program Update