[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]






                   AIRPORT FINANCING AND DEVELOPMENT

=======================================================================

                                (113-75)

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                                AVIATION

                                 OF THE

                              COMMITTEE ON
                   TRANSPORTATION AND INFRASTRUCTURE
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             JUNE 18, 2014

                               __________

                       Printed for the use of the
             Committee on Transportation and Infrastructure

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             COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE

                  BILL SHUSTER, Pennsylvania, Chairman
DON YOUNG, Alaska                    NICK J. RAHALL, II, West Virginia
THOMAS E. PETRI, Wisconsin           PETER A. DeFAZIO, Oregon
HOWARD COBLE, North Carolina         ELEANOR HOLMES NORTON, District of 
JOHN J. DUNCAN, Jr., Tennessee,          Columbia
  Vice Chair                         JERROLD NADLER, New York
JOHN L. MICA, Florida                CORRINE BROWN, Florida
FRANK A. LoBIONDO, New Jersey        EDDIE BERNICE JOHNSON, Texas
GARY G. MILLER, California           ELIJAH E. CUMMINGS, Maryland
SAM GRAVES, Missouri                 RICK LARSEN, Washington
SHELLEY MOORE CAPITO, West Virginia  MICHAEL E. CAPUANO, Massachusetts
CANDICE S. MILLER, Michigan          TIMOTHY H. BISHOP, New York
DUNCAN HUNTER, California            MICHAEL H. MICHAUD, Maine
ERIC A. ``RICK'' CRAWFORD, Arkansas  GRACE F. NAPOLITANO, California
LOU BARLETTA, Pennsylvania           DANIEL LIPINSKI, Illinois
BLAKE FARENTHOLD, Texas              TIMOTHY J. WALZ, Minnesota
LARRY BUCSHON, Indiana               STEVE COHEN, Tennessee
BOB GIBBS, Ohio                      ALBIO SIRES, New Jersey
PATRICK MEEHAN, Pennsylvania         DONNA F. EDWARDS, Maryland
RICHARD L. HANNA, New York           JOHN GARAMENDI, California
DANIEL WEBSTER, Florida              ANDREE CARSON, Indiana
STEVE SOUTHERLAND, II, Florida       JANICE HAHN, California
JEFF DENHAM, California              RICHARD M. NOLAN, Minnesota
REID J. RIBBLE, Wisconsin            ANN KIRKPATRICK, Arizona
THOMAS MASSIE, Kentucky              DINA TITUS, Nevada
STEVE DAINES, Montana                SEAN PATRICK MALONEY, New York
TOM RICE, South Carolina             ELIZABETH H. ESTY, Connecticut
MARKWAYNE MULLIN, Oklahoma           LOIS FRANKEL, Florida
ROGER WILLIAMS, Texas                CHERI BUSTOS, Illinois
MARK MEADOWS, North Carolina
SCOTT PERRY, Pennsylvania
RODNEY DAVIS, Illinois
MARK SANFORD, South Carolina
DAVID W. JOLLY, Florida
                                ------                                

                        Subcommittee on Aviation

                FRANK A. LoBIONDO, New Jersey, Chairman
THOMAS E. PETRI, Wisconsin           RICK LARSEN, Washington
HOWARD COBLE, North Carolina         PETER A. DeFAZIO, Oregon
JOHN J. DUNCAN, Jr., Tennessee       EDDIE BERNICE JOHNSON, Texas
SAM GRAVES, Missouri                 MICHAEL E. CAPUANO, Massachusetts
BLAKE FARENTHOLD, Texas              DANIEL LIPINSKI, Illinois
LARRY BUCSHON, Indiana               STEVE COHEN, Tennessee
PATRICK MEEHAN, Pennsylvania         ANDREE CARSON, Indiana
RICHARD L. HANNA, New York           RICHARD M. NOLAN, Minnesota
DANIEL WEBSTER, Florida              DINA TITUS, Nevada
JEFF DENHAM, California              SEAN PATRICK MALONEY, New York
REID J. RIBBLE, Wisconsin            CHERI BUSTOS, Illinois
THOMAS MASSIE, Kentucky              CORRINE BROWN, Florida
STEVE DAINES, Montana                ELIZABETH H. ESTY, Connecticut
ROGER WILLIAMS, Texas                NICK J. RAHALL, II, West Virginia
MARK MEADOWS, North Carolina           (Ex Officio)
RODNEY DAVIS, Illinois, Vice Chair
BILL SHUSTER, Pennsylvania (Ex 
    Officio)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
                                CONTENTS

                                                                   Page

Summary of Subject Matter........................................    iv

                               TESTIMONY
                                Panel 1

Benito De Leon, Deputy Associate Administrator for Airports, U.S. 
  Federal Aviation Administration................................     5
Gerald L. Dillingham, Ph.D., Director, Physical Infrastructure 
  Issues, U.S. Government Accountability Office..................     5

                                Panel 2

Mark Baker, president and CEO, Aircraft Owners and Pilots 
  Association....................................................    26
Todd Hauptli, president and CEO, American Association of Airport 
  Executives.....................................................    26
Sharon Pinkerton, senior vice president, legislative and 
  regulatory policy, Airlines for America........................    26
Mark Reis, chair, Airports Council International--North America, 
  and managing director, Seattle-Tacoma International Airport....    26

               PREPARED STATEMENTS SUBMITTED BY WITNESSES

Benito De Leon...................................................    49
Gerald L. Dillingham, Ph.D.......................................    58
Mark Baker.......................................................    85
Todd Hauptli.....................................................    91
Sharon Pinkerton.................................................   101
Mark Reis........................................................   107

                       SUBMISSION FOR THE RECORD

Ed Bolen, president and CEO, National Business Aviation 
  Association, written statement.................................   117

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

 
                   AIRPORT FINANCING AND DEVELOPMENT

                              ----------                              


                        WEDNESDAY, JUNE 18, 2014

                  House of Representatives,
                          Subcommittee on Aviation,
            Committee on Transportation and Infrastructure,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:04 a.m., in 
Room 2167, Rayburn House Office Building, Hon. Frank A. 
LoBiondo (Chairman of the subcommittee) presiding.
    Mr. LoBiondo. Good morning. The subcommittee will come to 
order.
    I would like to thank everyone for being here.
    Today we look forward to hearing from the Federal Aviation 
Administration, the Government Accountability Office, and 
industry stakeholders on the current and future state of 
airport financing and development.
    Airports serve as an important foundation--not just 
important, but critical, foundation of our Nation's 
infrastructure. They enable millions of passengers to travel 
throughout the United States and to destinations all over the 
world.
    Airports are also a tremendous economic driver for many 
communities across the United States where airports and their 
air operators help connect large and small communities.
    Airports support over 10 million jobs with annual payrolls 
of over $360 billion. They produce annual output of $1.2 
trillion to our economy. Airports play an important role to 
stimulate local economies.
    They connect our region to the Nation's transportation 
grid, helping to bring additional visitors and tourism dollars 
to the region.
    Federal programs, including the FAA's Airport Improvement 
Program, provide funding to help enhance airport capacity, 
security, efficiency and safety.
    Just 2 weeks ago Atlantic City International Airport, 
which, if you didn't know, is in my district, was able to 
receive nearly $1.7 million in AIP grants to help operations 
and dependability.
    This is just one of many examples in a long-established 
history of South Jersey airports and stakeholders working 
together with the FAA to continue the standard of excellence.
    Looking ahead, the FAA forecasts long-term aviation growth, 
including additional traffic, which may require the need for 
increasing system capacity. In fact, I don't see how it can not 
have the need to increase system capacity.
    This forecast calls for U.S. carrier passenger growth over 
the next 20 years to average 2.2 percent per year and more than 
1 billion passengers being transported in the U.S. system.
    Just this past May we saw evidence to support the FAA's 
forecast as the majority of U.S. air carriers expanded their 
flying capacities in order to accommodate the increased demand 
of air traffic.
    Given these projections, industry, FAA and Congress will 
need to work together and look to see what innovative 
approaches are out there to maintain our Nation's airports' 
ability to continue providing safe and efficient service.
    This type of innovation is already taking place at the 
FAA's William J. Hughes Technical Center in my district. 
Research is being conducted in collaboration with industry and 
academia to ensure that the needs of our current and future air 
transportation systems are being met.
    The FAA Tech Center also operates the National Airport Test 
Facility on its campus. This is a state-of-the-art, full-scale 
pavement research facility which, among many other things, 
provides the FAA with engineered solutions for pavement designs 
that improve safety at airports.
    The subcommittee is very interested in hearing from the 
witnesses their perspectives on the funding mechanisms that 
exist to finance and develop airports and how Federal programs 
are being utilized, what could be improved, and what challenges 
lie ahead.
    We are also very interested in hearing how industry 
stakeholders from airports to air carriers have found creative 
ways to retain or increase their ability to provide air 
service.
    As we turn towards reauthorization in the next FAA bill, we 
hope to continue this dialogue on airport financing. It is 
important that we hear from all stakeholders and receive your 
input to learn what ideas work and do not work in the real 
world.
    I look forward to hearing from our witnesses today and 
thank them for joining us.
    Before I recognize Mr. Larsen for his comments, I ask 
unanimous consent that all Members have 5 legislative days to 
revise and extend their remarks and include extraneous material 
for the record of this hearing. Without objection, so ordered.
    Without objection, now I turn to Mr. Larsen for your 
opening remarks.
    Mr. Larsen. Thank you, Chairman LoBiondo, for calling 
today's hearing regarding airport financing and development.
    In 2013, the U.S. saw over 730 million passengers travel 
through its airports. And, by 2027, the FAA forecasts the 
number of annual domestic and international air passengers in 
the U.S. will reach 1 billion passengers, a 24-percent increase 
in domestic enplanements and a 41-percent increase in 
international enplanements within that increase.
    Forecasts of increasing air travel may seem encouraging for 
the economy, but without adequate investment, passengers may 
experience more congestion and delays and our country may lose 
economic opportunities.
    In a recent study, the U.S. Travel Association found that 1 
in 5 of the Nation's major airports currently experience 
Thanksgiving-type levels of congestion at least once a week. 
Unless airports add capacity, 24 of the Nation's top 30 
airports will reach these levels of congestion within the next 
5 years.
    There are real dollar figures associated with economic 
losses that will occur if our airports cannot accommodate this 
increased future travel.
    One study by the Eno Center for Transportation estimates 
that, in 2016 alone, the U.S. economy would lose out on over $6 
billion in travel spending because of capacity constraints at 
just two airports and, by 2034, the center estimates this 
figure would reach $48 billion annually.
    So the bottom line is that we can't have a big-league 
economy if we have Little League infrastructure. Our Nation's 
airports are critical economic drivers and gateways that 
connect travelers all over the globe to the U.S. They also 
connect our communities to each other across the Nation.
    So we need to continue to invest in our infrastructure to 
remain economically competitive. At the same time, we need to 
make sure that we do not either overtax or overburden the 
aviation industry and passengers, as well as make sure that we 
don't put unbearable debt demands on the airports themselves.
    Congress has long recognized a Federal role with respect to 
investing in aviation infrastructure. Two important ways the 
Federal Government supports the development of airports include 
the AIP--Airport Improvement Program--as well as passenger 
facility charges, or PFCs.
    The FAA estimates there are $42.5 billion in AIP-eligible 
airport capital projects needing investments over the next 5 
years, about $8\1/2\ billion annually. And a leading industry 
airport association estimates a capital need at about $71.3 
billion over the next 5 years, or about $14.3 billion annually, 
in other words, a lot of money.
    The FAA Modernization Reform Act of 2012 authorized annual 
AIP funds for $3.35 billion annually through 2015. However, 
even with airports' ability to raise revenue through PFCs, 
there is a significant gap between the available funding and 
the investment needed for these critical safety and capacity 
projects.
    So as we prepare to authorize the FAA next year, this 
hearing is an opportunity for us to explore these issues facing 
our airports.
    This includes examining the current needs of airports, how 
the industry is financing capital development with its limited 
resources, and the Federal Government's role to ensure adequate 
investment. This is no small task.
    There are more than 19,000 airports in the U.S., and nearly 
3,400 of those airports are designated by the FAA as part of 
the National Plan of Integrated Airport Systems, making them 
eligible for Federal funds. They range from large hubs with 
commercial service to small GA airports.
    We have one of the greatest aviation systems in the world. 
Whether large or small, airports across the country have a 
documented economic impact on their communities as well as the 
ability to connect people, goods and services.
    In my home State of Washington, constituents rely on 
airports of all sizes. In my hometown of Arlington, general 
aviation at the Arlington Municipal Airport is hugely important 
and the annual fly-in there brings in people from all across 
the country.
    Bellingham International Airport in northwest Washington is 
developing as a commercial airport and has seen double-digit 
growth in recent years, requiring further investments in 
terminal and operation infrastructure.
    And my constituents rely on Seattle-Tacoma International 
Airport, one of the major hubs in our country's aviation 
system. And I am pleased that Mark Reis from Sea-Tac is with us 
today.
    Each of these airports plays a different, yet important, 
role in serving the local community and the national aviation 
network. As this committee considers airport funding, we need 
to encourage investment in airports, large and small.
    Mr. Chairman, as we recently discussed at our hearing 
regarding small community air service, maintaining a national 
air transportation system will require a sustained Federal 
commitment.
    I look forward to hearing from our witnesses today about 
the status of our airport infrastructure and ideas for 
continued investment now and in the future.
    And, finally, Mr. Chairman, I want to take a moment before 
I finish to recognize a key staff member of this subcommittee 
who will soon be leaving us. This will be the last hearing that 
we will have the wise counsel of Giles Giovinazzi.
    Giles has been a great resource for myself and for my 
staff, and we will be losing a great deal of institutional 
knowledge as well.
    I want to thank Giles for his many years of admirable 
service to this committee and wish him and his family well as 
they move on to new opportunities, thankfully, on the west 
coast. Thanks, Giles.
    [Applause.]
    Thank you, Mr. Chairman.
    Mr. LoBiondo. We thank Mr. Larsen. And we, too, would like 
to thank Giles for his years of service and his strong approach 
to solving problems. We wish all the best in California for you 
and your family.
    I would now like to recognize the chairman of the full 
committee, Chairman Shuster, for opening remarks.
    Mr. Shuster. Thank you very much, Chairman LoBiondo.
    And let me start off by thanking Giles for all of his hard 
work. And although he works on the other side of the aisle, he 
has been somebody that I have talked to and learned from over 
the years. He really is an expert on the subject. California 
DOT is going to benefit by his wisdom and his hard work.
    So we wish you well.
    I had a discussion with him the other day. It sounds like 
we are going to see him back here in Washington occasionally--
or more than occasionally.
    Our door is always open to you, Giles, and best wishes to 
you as you move on.
    Again, I want to thank Chairman LoBiondo for holding this 
hearing today to discuss the current and future funding and the 
status of airport financing and their development.
    I think everybody in the room knows the importance that 
airports play in our aviation system and our airline system. 
Not only are they the gateways to our skies, but they provide a 
critical role in emergency and disaster responses.
    And there also are economic drivers in the communities that 
they are in. That is something we need to again make sure we 
pay close attention to.
    As the chairman and the ranking member have so ably talked 
about the future and the forecast, we are going to see more 
passengers. We are going to see more cargo moving through these 
airports.
    And in this current budget situation, we are all finding 
out how to do more with less. However, we need to ensure that 
we are making the investments in the airports and maintaining 
the current system to accommodate that future growth.
    I think everybody is aware that the FAA authorization 
expires September of 2015. We have already begun to lay the 
groundwork at hearings like this and others that the ranking 
member and the chairman have held, making sure that we fully 
understand the situation.
    Chairman LoBiondo, myself, and Congressman Graves have held 
already a number of listening sessions with stakeholders to 
find out where they are, what their thoughts are and ways we 
can improve.
    I think we have an opportunity that doesn't come along 
often that we are going to be able to do something significant 
to improve the FAA, to reform the FAA, to change the way they 
do business, so that we can all benefit by efficiencies that 
NextGen gives us.
    I look at the wall up there with all those chairmen and I 
think every single one of them talked about NextGen at one 
point when they were chairmen.
    That goes back over 20 years ago, maybe even 30 years, we 
have been talking about it, and the time has come that we need 
to try to figure something out to get this done.
    We are very interested in hearing all the stakeholders, 
getting their views, and I see a couple out there that have 
already had listening sessions with us. And we invite you to 
share your thoughts and concerns as we move forward to the next 
FAA reauthorization.
    So, again, thank you, Mr. Chairman, for holding this 
hearing. I yield back.
    Mr. LoBiondo. Thank you, Chairman Shuster.
    We now will welcome our witnesses. On the first panel, we 
have Mr. Ben De Leon, Deputy Associate Administrator for 
Airports at the Federal Aviation Administration; and a very 
frequent and welcome witness, Dr. Gerald Dillingham, Director 
of Physical Infrastructure Issues for the U.S. Government 
Accountability Office.
    Mr. De Leon, you are recognized for your statement.

TESTIMONY OF BENITO DE LEON, DEPUTY ASSOCIATE ADMINISTRATOR FOR 
 AIRPORTS, U.S. FEDERAL AVIATION ADMINISTRATION; AND GERALD L. 
 DILLINGHAM, PH.D., DIRECTOR, PHYSICAL INFRASTRUCTURE ISSUES, 
             U.S. GOVERNMENT ACCOUNTABILITY OFFICE

    Mr. De Leon. Chairman LoBiondo, Chairman Shuster, Ranking 
Member Larsen, members of the subcommittee, thank you for the 
opportunity to discuss the Federal Aviation Administration's 
role in developing our Nation's airport infrastructure.
    The FAA is committed to a safe and efficient national 
system of airports. Our national airport planning efforts in 
the administration of the Airport Improvement Program, commonly 
referred to as the AIP program, are targeted toward addressing 
the system's most pressing needs.
    AIP investments will facilitate improvements in the core 
areas of safety, capacity, delay reduction, security and 
environmental sustainability. The AIP program supports a 
national system of airports that includes airports of all sizes 
located across the country.
    This system is the backbone of the aviation system that is 
important to the success of the U.S. economy. Because demand 
for the AIP grant funds consistently exceeds availability, 
effective focusing these investments is critical to maintaining 
an adequate national system of airports.
    To achieve that success in our airport planning 
investments, we collaborate with the full range of 
stakeholders; we carefully consider reports and recommendations 
from GAO and other organizations; and, we consistently review 
system performance to measure success and identify areas for 
improvement.
    An area that we have identified to be in need of 
improvement is the ability to focus AIP resources on smaller 
commercial and general aviation airports. AIP grants are just 
one of several sources that airports use to fund capital 
investment. Other sources include passenger facility charges, 
commonly referred to as PFCs, bonds, and airport revenues. The 
availability of funding sources varies with the type of airport 
and level of activity.
    For larger commercial service airports with a significant 
number of passengers, PFC revenues are a more flexible capital 
funding source. Airports with strong passenger volumes can 
generally issue bonds backed by future PFC revenues.
    As a result, larger airports are generally less reliant on 
AIP grants, while smaller airports may be much more heavily 
reliant on AIP funding. Yet, many of those small airports are 
also very important to the overall system either for access or 
to relieve pressure on larger commercial service airports. 
Without them, the larger commercial service airports will need 
to accommodate more aircraft, which can reduce capacity and 
increase delays. The users of large airports depend on some of 
these smaller airports for overall system capacity and 
efficiency. Focusing AIP resources on smaller commercial and 
general aviation airports is a prudent and necessary investment 
to help the entire system.
    The FAA reviews all requests for AIP funding with a careful 
focus on aeronautical need. The FAA's top priority is safety, 
and we have made runway safety a focus. AIP grants are funding 
runway safety area improvements, or RSAs, that provide an extra 
margin of safety on a runway should an aircraft overrun, 
undershoot, or stray from the runway.
    Maintaining facilities, including runways, taxiways, and 
equipment, in a state of good repair is critical to the safety 
of the airport system. We are constantly working with airport 
operators to preserve existing infrastructure.
    In the last 15 years, 16 new AIP-supported runways were 
completed at many of the busiest commercial service airports in 
the United States.
    These projects and others decreased average delay per 
operation at these airports by about 5 minutes. This might 
sound minor, but because the delays propagate throughout the 
system, that degree of improvement is significant.
    In closing, investment in our national airport 
infrastructure is crucial in maintaining the safest, most 
efficient air transportation system in the world. The AIP 
program is a vital capital funding source that works 
effectively with other funding sources to support the Nation's 
airport infrastructure.
    Thank you again for providing me with the opportunity to be 
here today, and I will be happy to answer any questions at this 
time.
    Mr. LoBiondo. We thank you very much.
    Now we will turn to Dr. Dillingham. I will now recognize 
you for your statement.
    Dr. Dillingham. Thank you, Mr. Chairman, Chairman Shuster, 
Ranking Member Larsen, members of the subcommittee.
    Since 2007, there has been a significant change in the 
aviation industry. At many airports, aviation activity has 
declined and has become concentrated at larger airports.
    Given the potential effect of these changes on airport 
infrastructure demands and finances, my statement this morning 
focuses on two key questions surrounding airport development: 
First, what are the estimated future costs of airports planned 
development? Second, what are the types and amounts of funding 
available to finance that development?
    Regarding the future cost of airport development, the 
latest estimates from FAA and the Airports Council 
International--North America, or ACI-NA, both show a decline in 
the cost of airport planned development.
    This decline is attributable to several factors, including 
airports choosing to defer projects due to reductions in 
aviation activities, which can be linked to the recent 
recession, airline consolidation, and higher fuel costs.
    FAA's most recent estimate of airport development costs for 
projects which are eligible for Federal funding is $8.5 billion 
annually. This estimate was approximately $2 billion per year 
or 18 percent less than FAA's previous estimate for the 2011 
through 2015 timeframe.
    In addition, ACI-NA estimated another $4.6 billion for 
planned development that are not eligible for Federal funding. 
Therefore, in combining the latest available FAA and ACI-NA 
estimates, the total estimated annual cost of planned 
development is about $13.1 billion.
    We plan to report on the updated estimates when they become 
available this fall for this committee.
    Turning to our second question regarding the types and 
amounts of funds available to support airport development, 
overall, federally authorized support for airports, 
specifically AIP funding and PFCs, has declined in recent years 
while nonaviation or landside revenue sources have grown.
    Specifically, annual appropriations for AIP decreased from 
about $3.5 billion for fiscal year 2011 to about $3.35 billion 
in fiscal years 2012 through 2014.
    In addition, while the current House and Senate 
appropriations bill keeps the amount of AIP funding at or above 
current levels, the President's 2015 budget calls for a 
reduction in AIP appropriations to $2.9 billion.
    With regard to PFCs, since PFCs were first approved in 
1990, they have expanded to include 388 airports. However, 
collections are very concentrated, with almost 90 percent of 
all PFCs going to large and medium hubs.
    Total PFC collections also declined along with passenger 
traffic during the last recession, but since have rebounded to 
$2.8 billion in 2013. The Federal cap of $4.50 for PFC has not 
increased since 2000.
    As a result, many airports' future PFC collections are 
already committed to pay off debts for past development 
projects, leaving little room for funding new development. The 
President's 2015 budget has called for increasing the PFC cap 
to $8 while eliminating AIP for larger airports.
    In response to declining Federal support for airport 
development, airports have sought to increase their nonaviation 
revenues. By focusing on other business activities to generate 
revenues, some airports have become involved in an increasing 
range of unique developments on airport properties.
    For example, some airport operators generate revenues 
through temporary leases of airport property for uses as 
diverse as solar farms, oil extraction, cattle grazing and golf 
courses.
    In addition, public-private partnerships involving airports 
and developers are being used to finance airport development 
projects, such as the planned terminal construction at 
LaGuardia Airport in New York.
    However, these options are not available to all airports. 
Many airports, especially those located in smaller communities, 
could not survive without Federal support. These airports 
provide a vital link to the Nation's aviation system for those 
communities.
    Mr. Chairman, as the committee begins its deliberations for 
the 2015 FAA reauthorization and the appropriate Federal 
support for airport developments, it will have some critical 
questions and information needs.
    These include whether declining Federal support could 
negatively effect the national system of airports and the 
communities they serve, whether greater private investment 
could be encouraged at airports, and if an increase in the PFC 
cap is warranted.
    We are currently assessing these issues for this committee 
and expect to report our findings out later this year.
    Thank you, Mr. Chairman.
    Mr. LoBiondo. Doctor, we thank you very much.
    We will now go to some questions.
    For you, Mr. De Leon, with the talk about the AIP grants, 
and last year the FAA issued about $3.2 billion, can you walk 
us through the collaborative process to approve or deny an AIP 
grant application to get the money to the airports. How does 
that work?
    Mr. De Leon. Yes, sir. We like to pride ourselves in being 
collaborative with our airport sponsors. We work really closely 
with them.
    We start in the neighborhood of 3 to 4 years in advance of 
issuing a grant during the planning stage. We work with airport 
sponsors to identify their critical needs today and in the 
future and, hopefully, lay the groundwork for future grants.
    So, we start early and work with the sponsor in a 
transparent process. We follow the sponsor through the 
environmental process for that particular project. When we get 
to the actual construction, designing and building the project, 
we work closely with the sponsor to identify a funding plan 
that works for the FAA and the sponsor and that also meets 
their timeline.
    Generally speaking, we collaborate with sponsors early on a 
lot of projects so that we don't end up denying projects. We 
work closely with them. It is a matter of timing on when we 
issue the grants to them, and we try to keep that collaboration 
open.
    Mr. LoBiondo. And you respond to AIP grant applications. 
Correct?
    Mr. De Leon. That is correct.
    Mr. LoBiondo. So you don't initiate the project? You review 
the projects that are presented for the grants by the airports?
    Mr. De Leon. Well, we don't initiate the actual grant 
application process. But before an application is received, we 
have already been working with them on identifying the projects 
that they need to meet their critical needs. So, we have 
already had a number of discussions before the application 
comes in.
    Mr. LoBiondo. But that is when the airport comes to you and 
starts talking about what the needs may be and you start 
working through with the preliminary discussions?
    Mr. De Leon. Yes, sir. Correct.
    Mr. LoBiondo. Last year, also for you, Mr. De Leon, 
airports spent roughly $2.8 billion on PFC projects and the FAA 
issued, again, $3.2 billion in AIP grants.
    Can you please help us understand the fundamental 
difference between AIP and passenger facility charge dollars 
and what they can be used for.
    Mr. De Leon. Well, generally, PFC dollars follow the same 
eligibility as AIP project-wise, except PFC has----
    Mr. LoBiondo. Can you pull your mic closer to you.
    Mr. De Leon. I'm sorry.
    Except PFC can be used for gates and boarding areas. So 
there are a lot of similarities. But, what we are seeing is 
that a lot of the larger airports that implement PFCs usually 
use PFCs on landside-type projects and then AIP funding is used 
on the airside projects. It is sort of a balance between the 
two.
    Mr. LoBiondo. Dr. Dillingham, could you tell us, in your 
view, what would be the impact on AIP entitlement and 
discretionary funding if the President's budget request of $2.9 
billion for AIP were enacted.
    Dr. Dillingham. Yes, sir. According to the existing 
statutes, if the AIP appropriations is less than $3.2 billion, 
it significantly reduces the entitlement funds that are 
available; and, therefore, it would have a more devastating 
effect on small airports, since they rely more heavily on AIP 
than do the larger airports. It is about formulas, sir.
    Mr. LoBiondo. OK. And we understand that the GAO is 
currently conducting a study that will include an analysis of 
potential impact of raising the passenger facility charge.
    Can you tell us what issues are included in that study, 
when the study will be completed. And how do you think the 
findings of that study will be helpful to the committee?
    Dr. Dillingham. Yes, sir. We do have a study of PFCs 
underway for this committee. We are intending to look at 
various scenarios of the impact of raising the PFC. All 
airports may not decide to impose the full PFC that the 
Congress will grant.
    I think probably one of the most important concerns is the 
impact on traffic. We have in the past looked at the impact of 
imposing the $3 security fee a couple of years ago.
    And what we found was that there was a loss of passenger 
traffic--about 1 percent loss of passenger traffic. Over a 3-
year period, that was about 26 million passengers.
    As you know, Mr. Chairman, there is a certain amount of 
price elasticity for anything that we buy. I mean, if it gets 
to a certain price, then we will choose not to purchase it.
    Now, clearly, this may not impact certain kinds of 
passengers like business travelers who need to go, but it may 
impact the recreational traveler where you get just to that 
edge and they can't pay another $35 or $36 or $100.
    So we are trying to develop those scenarios so that we can 
provide them to this committee as they make their deliberations 
for the 2015 reauthorization.
    Mr. LoBiondo. Thank you very much.
    Mr. Larsen.
    Mr. Larsen. Thank you, Mr. Chairman.
    Mr. De Leon, the President's request proposes to decrease 
AIP grants by about $450 million. It also proposes to increase 
the PFC cap.
    Do you have an estimate of how much additional funding for 
infrastructure projects that would generate, the net that it 
would generate?
    Mr. De Leon. With an increase of $8, we estimate that it 
would add roughly about $2.5 billion extra above what the 
primary airports could use for airport development.
    Mr. Larsen. If the cap was increased to $8 and airports 
took advantage of that and large airports as well gave up AIP 
grants as proposed, would the FAA have any role in ensuring 
that airports would first invest in safety capacity, enhancing 
competition, as opposed to investing in revenue-producing 
projects?
    Mr. De Leon. Our thinking is that, even if the large 
airports move out of the program and return some of their 
entitlement dollars, that they will still have access to some 
discretionary dollars, particularly if we have some national 
safety initiatives that we want to impress on the system 
itself. For instance, the Runway Safety Initiative is underway 
right now. It is important to implement that across the 
country.
    So, in cases where we have a special initiative, a safety 
initiative in particular, we would probably allow them access 
to some discretionary funds.
    Mr. Larsen. I hope the airports can address that a little 
bit as well when they are up here.
    Since 2005, there have been three mergers involving six 
major legacy carriers in the U.S. Has FAA itself done any--or 
have any view of how industry consolidation has affected 
capital needs of airports throughout the system?
    Mr. De Leon. We have not done a formal analysis. We have 
seen consolidation come about. There are a lot of dynamics in 
the aviation system right now with consolidation, up-gauging, 
down-gauging. We are not sure how the actual dust is going to 
settle on some of the hubs, whether they will continue to 
operate or not. So, it is more or less kind of wait and see. We 
are looking at things internally, but nothing formal until 
things shake out on the airline side.
    Mr. Larsen. Yeah.
    Dr. Dillingham, can you answer that question? Have you 
looked at that question?
    Dr. Dillingham. Yes, sir. We haven't focused specifically 
on that. But as part of our general monitoring of what goes on 
in the aviation industry, there are a couple of things that 
seem obvious to us.
    One is that some of the--well, I agree with Mr. De Leon 
that you can't totally separate out the effect of 
consolidation, but you can look at certain elements of 
consolidation, like the decision to dehub an airport as part of 
consolidation.
    You would see less activity at that airport. Activity is 
what takes a toll on infrastructure. You will also see, when 
there are things like dehubbing or consolidation, where certain 
airports are no longer as active as they used to be.
    You will see a case where, again, airports will either 
decide not to invest in infrastructure or delay that 
infrastructure, again, related to aviation activity.
    Mr. Larsen. OK. Also, Dr. Dillingham, has GAO concluded 
that, at current AIP funding levels, if they continue as they 
are, would they be sufficient to meet planned capital 
development costs for the next 5 years?
    Dr. Dillingham. Mr. Larsen, I think it was said earlier 
that there is a continuous gap between planned development and 
available funds, and we don't expect that that will change.
    We will know better when both FAA and ACI-NA come out with 
their new estimates and we are able to complete that work that 
we are also doing for this committee for the 2015 
reauthorization.
    But, you know, the bottom line is there is likely to be a 
gap. And we are careful to say planned development as opposed 
to needed development, because there is a difference there.
    Mr. Larsen. I like to say demand is infinite. Need you can 
define.
    Finally, Dr. Dillingham, this question of PFC and the cap 
versus AIP versus the general capacity of airports to finance 
development, has GAO at all looked at the ability of airports 
to finance capital improvements through debt?
    And, if you have, have you looked at the difference 
between, say, a public airport like a Sea-Tac, which is a Port 
Authority airport, versus a privately run airport? Have you 
looked at that kind of issue at all?
    Dr. Dillingham. Generally, what we found is that airports, 
especially large airports, are very stable and easily obtain 
capital funding from the private sector in terms of bonding. 
But that is where about, I think, 50 percent of airport funding 
derives from.
    A much smaller proportion of public funding through bonds 
is available to small airports. We see it as about 15 percent 
for small airports.
    And part of the work that we are doing now is looking at 
the status and financial status of airports--we are hearing 
from the bond rating agencies on Wall Street that airports have 
excellent bond ratings.
    So that should continue into the future, especially as 
passenger traffic increases, as was mentioned earlier.
    Mr. Larsen. Thank you.
    Thank you, Mr. Chairman.
    Mr. LoBiondo. Mr. Shuster.
    Mr. Shuster. Thank you, Mr. Chairman.
    Mr. De Leon, I think you said it was $3.35 billion in AIP 
funds. Is that the number total?
    Mr. De Leon. Yes.
    Mr. Shuster. What's the breakdown between the entitlement--
what's been on the entitlement and what's been discretionary? 
What is the formula? And what----
    Mr. De Leon. Generally, the breakdown is, of the $3.3 
billion, about two-thirds of it is classified as entitlement 
dollars. About one-third is discretionary.
    Mr. Shuster. And looking at the challenges that the FAA 
faces in administering those AIP funds--and I have traveled 
around the country and I have talked to the airlines, I have 
talked to the airport. And sometimes they are not always on the 
same page as to what investments should be made in the airport.
    When you are giving these grants out, do the airlines weigh 
in on what you give to an airport? Do they deem that they are 
the customer?
    Or even the GA community that uses some of these airports 
significantly, they may have differences of opinion. Do they 
have a voice in the discretionary?
    Mr. De Leon. I would like to say yes, but it is not always 
the case. We like to have the airports coordinate the projects 
with the tenants and the community because we find that if they 
do that and they collaborate, the projects are easier to 
administer. But, that collaboration doesn't happen consistently 
across the country.
    Mr. Shuster. And what are the biggest challenges you face 
on AIP grants?
    Mr. De Leon. I think one of the biggest challenges we have 
is that there are some safety initiatives that we really want 
to undertake, and they are good size safety initiatives.
    We want to be able to use the discretionary funds towards 
safety, because safety is number one for the FAA. We have a lot 
of things going on in the safety umbrella.
    We have taken care of the capacity. So the capacity is 
pretty good for right now, but it is not going to stay that way 
forever.
    Mr. Shuster. Mr. Dillingham, it is good to see you back 
here again. You are a regular visitor. We appreciate it.
    Dr. Dillingham. Thank you, Mr. Chairman.
    Mr. Shuster. You talked about the security fee increase and 
the price elasticity of it and 26 million less customers. And 
we see that, in the airline industry now, the demand appears to 
be up on seats. Their prices are inching up, which we 
understand that's the way it works, supply and demand.
    As we see that increase--and I know there is talk--the 
President proposed, I think, $8. The airports have proposed 
$8.50, a 3.50, $4 increase.
    Have you done an analysis on improving climate in the 
airline industry and prices going up there, as well as putting 
higher fees on--do you have any analysis on what kind of 
downturn that is going to have on passengers?
    Dr. Dillingham. Mr. Chairman, those questions that you ask 
are part of our current work that we are doing for you and the 
subcommittee. We expect that we will be able to report that out 
to you by the end of the year.
    Mr. Shuster. Well, I thank you for that and look forward to 
seeing that.
    And I know we have got to figure out how--airports need 
money. Everybody in the country has clamored for more money 
when it comes to especially infrastructure and transportation.
    If you increase PFCs, what kind of benefit do you see for 
the airports? And, again, the proposal is they raise the PFCs 
and they eliminate AIP funds. Is that correct?
    Dr. Dillingham. Yes, sir.
    Mr. Shuster. And what kind of benefit do you project? Is 
that something you are looking at, also?
    Dr. Dillingham. Yes. It is already established that, if the 
airports get a raise in PFCs, it would allow them to undertake 
more infrastructure projects.
    And, also, the other side of it is that, if they impose 
that full PFC, then moneys are turned back to the FAA and that 
money becomes part of discretionary and, also, available to 
smaller airports.
    So it is sort of a two-way street that goes there, keeping 
in mind that, again, on those margins, the passenger traffic 
could be affected.
    And if the passenger traffic is affected, less tickets are 
sold, less money goes into the trust fund. So it is sort of a 
complex sort of merry-go-round that happens there.
    Mr. Shuster. And, of course, one of my big concerns, coming 
from a rural area, is small airports and even medium-size 
airports.
    The Pittsburgh airport, for example, had a significant 
reduction in flights to it. They fortunately, though, are one 
of those airports that they found natural gas on the airport.
    So they have finally--instead of trying to fight the FAA 
wanting to spend the money in downtown Pittsburgh, they finally 
realized that the money has to stay on site, which I am very 
happy that has happened in Pittsburgh.
    You mentioned other airports, golf courses and various 
other developmental projects to help them gain revenue. Do you 
consider that into the formula in the discretionary and the 
grants you give in the AIP funds, is that factored in anywhere 
or is that not considered?
    Mr. De Leon. I would like to say that it is probably 
considered at some point in time. But, when we issue the 
grants, we are talking about their matching funds, the ability 
for them to put the money upfront.
    A lot of times, it is not a question if they can't meet the 
matching funds. Rather, it is more of whether the project is 
eligible and ready to go and move forward.
    So we don't really get too deep in the nonaeronautical 
side.
    Mr. Shuster. So I guess my real question is: They are not 
penalized?
    Mr. De Leon. No.
    Mr. Shuster. The Pittsburgh airport is not going to be 
penalized for the great fortune they had by finding natural 
gas?
    Mr. De Leon. No, sir.
    Mr. Shuster. OK. I thank you.
    And I yield back.
    Mr. LoBiondo. Thank you.
    Mr. DeFazio.
    Mr. DeFazio. Thank you, Mr. Chairman.
    Dr. Dillingham, I know your current report is specifically 
on airport funding, but I want to delve back a little bit into 
some past work you have done.
    I was the Democratic author many years ago of PFCs--because 
I saw inequities where, for instance, people from Vancouver are 
using the Portland airport and don't even pay taxes in the 
State of Oregon--I thought it was an inequitable way to deal 
with these issues.
    The initial concern was abuses, off-airport uses and other 
abuses of PFCs. And I think, in the past, you have actually 
looked at those issues, what the authorized uses are and 
whether there has been any deviation from those.
    Can you update us on that? Are PFCs being used well within 
the existing authority in the law and usefully?
    Dr. Dillingham. Mr. DeFazio, to our knowledge, PFCs are, in 
fact, being used for their intended purposes and, in fact, are 
achieving what the objectives of the legislation were.
    FAA is pretty tough on revenue diversion and it is one of 
their priorities to ensure that those kinds of things don't 
happen or are minimized.
    Mr. DeFazio. And we have documented the need for the 
current state of our aviation infrastructure--I mean, it is not 
as bad as surface, but we certainly have unmet needs. And you 
have gone through those numbers.
    What are the--I just can't think. We have AIP, and 
currently we are spending less than the annual income to AIP; 
are we not? I mean, we see a growing balance in the trust fund?
    Dr. Dillingham. Yes. We do see a growing balance in the 
trust fund. In fact, the balance in the trust fund now--I think 
FAA is projecting in 2013 or 2014 that the uncommitted balance 
will be $4 billion plus.
    Mr. DeFazio. And is that because they need an operating 
cashflow reserve for commitments that are made or does that 
balance far exceed those needs?
    Dr. Dillingham. I am probably not in the best position to 
answer that. Maybe Mr. De Leon can answer.
    Mr. DeFazio. Mr. De Leon, can you answer that question?
    Mr. De Leon. I checked with the budget office this morning. 
We asked the same question about the trust fund balance. What 
we were told is that there is a current balance of roughly $13 
billion in the trust fund and there is roughly between $4 
billion and $5 billion that is uncommitted in the trust fund 
right now.
    Mr. DeFazio. And is--you know, with highways we have a 
number. You can't drop below that number and meet obligations 
on an ongoing basis because have you a cashflow issue.
    Do you know what that number is? It wouldn't be $4 billion. 
It would probably be substantially lower than that?
    Mr. De Leon. I do not know, sir. I will take an IOU on 
that.
    Mr. DeFazio. OK. That would be a useful thing to know.
    So we've got AIP. We've got PFCs. We've got rents. We've 
got the entrepreneurial activities. And now we have some 
privatization.
    I can only see one of--I guess two of those potentially--I 
don't know. Private investors need a return. So I am not sure 
that that will go there. Entrepreneurial is, I guess, the only 
one.
    But rents, PFCs and/or the financing of AIPs, should we 
raise the tax--all of those will be reflected in ticket prices, 
ultimately. Correct?
    Dr. Dillingham. Yes, sir.
    Mr. DeFazio. So I guess, then--for those who don't want to 
raise PFCs, I guess they would say the only place airports can 
go would be entrepreneurial activities that wouldn't bring back 
a burden?
    Because the privatization that--you have got to have even 
more return there because they need a return on their 
investment. So that maybe even puts a higher burden on 
potential charges towards passengers.
    Dr. Dillingham. Yes, sir. Nonaeronautical revenues are 
going to be the least burdensome to the taxpayer.
    Mr. DeFazio. Right.
    But how limited are those? I mean, I assume not all 
airports have that option. And even the airports that do have 
that option, how much of the unmet need do you think that can 
cover?
    Dr. Dillingham. You are correct that all airports don't 
have that option.
    The last numbers we have--I think 2012, 45 percent of 
airport revenues were attributable to nonaeronautical revenues 
including the biggies of parking and ground transport.
    That is still going to leave a gap compared to termed 
planned development needs.
    Mr. DeFazio. And if you would, say, substantially raise the 
car rental fees or you substantially raise the parking fees, 
that also has some sort of a detrimental impact on consumers 
planning a flight because they look at what the whole thing is 
going to cost them?
    Dr. Dillingham. Yes, sir.
    Mr. DeFazio. OK. So there is no easy way out of this?
    Dr. Dillingham. Exactly.
    Mr. DeFazio. OK.
    Thank you, Mr. Chairman.
    Mr. LoBiondo. Mr. Meehan.
    Mr. Meehan. Thank you, Mr. Chairman.
    And I thank the experts here for their testimony on this 
issue.
    One point I am just trying to understand is when you are 
doing your projections--and these are important because they 
look at the long-term implications.
    So I listened to Dr. Dillingham's testimony today about the 
impact that the economy is having on travel and, therefore, 
reduction in utilization. Maybe it is smaller airports. I 
really am not completely clear.
    But then I look at the FAA's projection, and you are saying 
that airport is going to grow at 2.2 percent. Travel is growing 
at 2.2 percent a year.
    How do you reconcile the differences in that? And where, 
really, is airport travel going to be over the course of the 
next 5 years?
    Mr. De Leon, do you know?
    Mr. De Leon. From the AIP program perspective, yes, we have 
the forecasts out there that we use as one factor for 
evaluating how we fund projects. But, we also actually work 
with a sponsor and we actually look at who is using the airport 
today, and what type of aircraft are using the airport today.
    A lot of airport sponsors have commitments from other 
people that: If you had a certain runway length or a taxiway, 
for example, we would come in and do business at your airport. 
That is factored into the analysis to determine AIP funding, 
more so than long-range forecasts.
    Mr. Meehan. One of the issues--and I am more interested in 
pursuing this further, but have a limited time.
    The issue that is of significant importance to me, 
representing an area in the Northeast in which there is a fair 
amount of congestion, what role does congestion play in the 
impact on costs associated with airports?
    I am trying to find the right balance in which we are 
looking at improvements in things like NextGen. And there is 
concerns about where we are in form of the implementation of 
NextGen.
    But, you know, do we have technologies that are going to 
impact the need for airport expansion or how do we measure 
appropriately what the right amount of airport expansion is to 
deal with congestion?
    Mr. De Leon. From an FAA standpoint, when we look at 
capacity, delays at airports, or a metropolitan area where you 
look at airport development on the ground, in order to maximize 
the development of, for example, a new runway, or a major 
runway extension, coupling that with NextGen technology would 
make the return on that investment even better.
    What we are working on as we go forward, is trying to 
incorporate NextGen technology into our development.
    Mr. Meehan. So even though you may be expanding the--or 
improving the efficiency and, therefore, the on-time arrival 
and, therefore, reduction in costs, there is still a critical 
role to be played by expanding the amount of asphalt, so to 
speak, to create more landing base?
    Mr. De Leon. I would say that right now, as we look at the 
capacity across the Nation, we are probably fine for the first 
decade, but there are some places that we understand are 
chronically delayed. I am not sure what the answer is in those 
locations.
    You can probably guess where they are. The New York area is 
a very difficult place to figure out what to do on that.
    Mr. Meehan. How do we figure that out? Because it is 
critical. I mean, these are things that I am struggling with 
because I am trying to find out the right balance to be able to 
ascribe who is responsible for what.
    We want to promote on-time delivery because there is a 
point in which--the testimony here today is lost opportunity. I 
mean, we have people who do not get a chance to take trips 
because of congestion and other kinds of things. This is the 
testimony I am reading.
    How do you find out where the right balance is between, you 
know, investment--well, the right balance that will help us 
deal with the congestion?
    Mr. De Leon. Well, I like to say that it starts, at least 
from the FAA standpoint, during the planning process. Working 
really closely with the airport sponsor to get the information 
upfront, and working with all of the stakeholders to finding 
out what the issues are, and trying to address the issues, are 
the best places to start. This is part of the planning process.
    As you go into the environmental process, it gets a little 
tighter because you must address the purpose and need and 
balance, and the environmental impacts. But, if you do your 
proper planning upfront, and get all the information upfront, 
that really helps the process in the long run.
    Dr. Dillingham. Mr. Meehan, if I could.
    Mr. Meehan. Yes, Dr. Dillingham.
    Dr. Dillingham. There are several initiatives on the way. I 
just want to relate back to your point about NextGen.
    Although NextGen has been going on for 10 years, we are now 
beginning to see NextGen being put in place, a suite of NextGen 
technologies, like in the Houston Metroplex.
    And so that is going to make going and coming out of that 
metropolitan area much smoother, much more environmentally 
friendly.
    At the same time, the question you raised earlier with 
regard to sort of what else is NextGen going to do, well, we 
have said a number of times before this committee that NextGen 
is not going to be enough, that it is going to address some of 
our problems, but as our passenger traffic increases, we are 
going to need to lay some more concrete.
    And FAA currently has a study underway that identifies--I 
think it is the third iteration of a study that identifies 
where that congestion is going to be and where the concrete 
needs to be laid.
    So there are a number of avenues coming together to address 
the issues that you presented.
    Mr. Meehan. When do you expect that report to be concluded? 
I am asking Dr. Dillingham.
    Dr. Dillingham. Well, he can tell you when the FACT report 
is going to be concluded. I just know they are doing it.
    Mr. Meehan. When?
    Mr. De Leon. Yes, sir. The report is scheduled to be 
concluded by the end of summer, or beginning of fall.
    Mr. Meehan. OK. Thank you.
    Mr. Chairman, I yield back.
    Mr. LoBiondo. Mr. Capuano.
    Mr. Capuano. Thank you, Mr. Chairman.
    Thank you, gentlemen.
    We are faced with another situation. People want more money 
than we have. Gee, how unusual. Never heard that before. And I 
am told that airports have plenty of money.
    But am I wrong to think, Mr. De Leon, that all the major 
airports, all the medium-size airports, are basically publicly 
owned and financed? Is that a correct assumption?
    Mr. De Leon. All of the large major airports are publicly 
owned. Yes.
    Mr. Capuano. Which means the taxpayer is on the hook if an 
airport has a financial problem. May not be a Federal taxpayer, 
but they are my taxpayers, too. It may be State or local or 
regional, but it is a taxpayer.
    Mr. De Leon. Well, the large hub airports have other 
funding mechanisms they can tap into.
    Mr. Capuano. I understand that.
    But those bonds and everything--if everything goes bad, who 
is on the hook if Logan Airport goes bankrupt? Massachusetts 
taxpayers.
    Mr. De Leon. That is correct.
    Mr. Capuano. That is right.
    If their bond rating goes up because they overextend 
themselves and something goes bad, who is on the hook?
    Mr. De Leon. The owner.
    Mr. Capuano. Taxpayers. My constituents, my taxpayers. Now, 
I am not against that. I am a liberal. I don't mind taxing 
people for things they want.
    But I want to be clear that airports are not some private 
entity. They are taxpayers who gather together to do something.
    Private financing. I have heard some comment on that. We 
just went to LaGuardia on a P3 field hearing at which they told 
us, yes, they are going to use private financing for one reason 
and one reason only. Because they have to do the work, in their 
estimation, and they can't get the money anyplace else.
    So private financing is not some panacea. Private financing 
is the result of not having enough money. And, yet, today I 
hear there is a $4 billion surplus.
    Now, based on my math, on the surface transportation, which 
has to be somewhat relevant, approximately each billion dollars 
makes 30,000 jobs. We are talking 120,000 jobs are going unhad 
in this country today because we have uncommitted money that 
has been paid by taxpayers.
    I come from a different universe. That strikes me as 
insane. Get that money to work. Put people to work. Address 
some of these issues so we can have an honest and legitimate 
discussion about where the money should come in the future.
    Mr. Dillingham, has GAO ever done a study on bang for the 
buck relative to PFCs and AIPs?
    Dr. Dillingham. What we have done is we have looked at what 
PFCs have been used for, how those uses coincide with the 
statute. I am not sure----
    Mr. Capuano. Well, the reason I ask is because there are a 
fair number of airports around the country that, especially the 
last couple of years, with contractions--we now have pretty 
large investments in airports that are now underutilized.
    If the argument is that the expansion of airports is 
important to our economy, shouldn't we be spending money where 
the economy is best enhanced, either through passengers or 
delay reductions or other such items that do have a direct 
impact on the economy, as opposed to letting taxpayer dollars 
be used to--oh, I don't know--maybe put another clothing store 
in a mall?
    By the way, have either if you gentlemen ever bought a suit 
at an airport?
    Dr. Dillingham. I can't afford them, Congressman.
    Mr. Capuano. Very good answer.
    Yet, taxpayer dollars--some of these dollars, on occasion, 
are used to support the expansion of airport malls. That 
strikes me as very bad prioritization.
    Now, if an airport wants to create a mall, let them do it 
with their own money. Never, never--``never'' for those of you 
who don't speak English--never allow taxpayer dollars that are 
meant to address safety and efficiency be used to sell a suit.
    Now, I have to buy suits, too. I have never bought one in 
an airport. It just strikes me that our priority is wrong.
    We are having this discussion prematurely. We have money in 
the bank not being used to do the things we need to do. We are 
not sure what the priority should be. Yet, there is extra 
demand. Well, demand for what? To have another glorious 
terminal?
    I have never once in my entire political life had somebody 
call and say ``I didn't like the terminal.'' I get lots of 
calls saying delays, cancellation. I get lots of calls, costs, 
extra fees. I have never had anybody say ``Oh, the terminal 
wasn't pretty.''
    Prioritization, gentlemen. Use the money more wisely than 
we have, then come back to us and talk to us about increasing 
costs and fees to taxpayers, and the public.
    Thank you, Mr. Chairman.
    Mr. LoBiondo. Mr. Farenthold.
    Mr. Farenthold. Thank you very much, Mr. Chairman.
    I will say to the gentleman from Massachusetts, you 
probably haven't flown out of terminal A here at Reagan 
National Airport lately because that one is ugly.
    But I do want to address a couple of questions to our 
witnesses. There has been a lot of talk about the PFC. What are 
some alternatives that are available to airports for funding? 
We have heard public-private partnerships, we have heard direct 
tax subsidies, both from the State, Federal, and local 
government. Are we missing anything in there?
    I will ask both gentlemen. We will start with Mr. De Leon.
    Mr. De Leon. No, I think you have probably covered it. 
Privatization is one of the things we are looking at right now. 
It hasn't taken off in the States, as you know, but we have an 
approved application in San Juan, Puerto Rico. It is pretty 
interesting. It looks like it is very promising.
    Other than that, I think you have covered all of the other 
avenues that I can think of.
    Mr. Farenthold. Mr. Dillingham, are we missing anything 
there?
    Dr. Dillingham. No, I think you did--I think you covered 
it. If you included nonaeronautical revenues, land-side 
revenues that have been increasing at about 4 percent a year 
over the last few years, so to the point that they are now 
representing about 45 percent of airport revenues.
    Mr. Farenthold. Now, do these shopping malls actually make 
money and pay for themselves?
    Dr. Dillingham. I don't really know. I would assume that 
there is a little bit of both in terms of some make money, some 
don't. There is also the notion of, you know, street-level 
pricing, where in some cases, airports, you know, what you pay 
in the airport is supposed to be, you know----
    Mr. Farenthold. All right. I understand that is a 
contractual provision in some airports----
    Dr. Dillingham. Right.
    Mr. Farenthold [continuing]. That you have to be 
competitive in the pricing.
    Dr. Dillingham. Right.
    Mr. Farenthold. And I will on behalf of my chief of staff 
who left his belt at TSA was very thankful he could purchase a 
belt at the Houston airport when he got there and realized he 
left his belt in Washington.
    Let's talk a little bit about PFCs. We have heard a lot of 
reference to them as taxes, but they sound to me more like a 
user fee. If airports are directly subsidized by the cities or 
the Federal Government, the nonflying public is paying for 
that, which I guess is OK because they receive the benefits of 
the economic activity that the airports generate, but don't you 
think that PFCs might be more accurately described as a user 
fee than a tax, Mr. De Leon?
    Mr. De Leon. I have no comment on that.
    Mr. Farenthold. All right, Mr. Dillingham, did you have any 
thoughts on that?
    Dr. Dillingham. Well, the point that you raised, 
Congressman, is a point that has been raised time and time 
again, and gets to be one of these, you know, you say tomato, I 
say tomahto kind of thing, and it depends on who is talking 
whether it is a user fee or a tax.
    Mr. Farenthold. All right, well, I appreciate you all being 
here.
    And I yield back the remainder of my time.
    Mr. LoBiondo. Mr. Maloney.
    Mr. Maloney. I have no questions at this time, sir.
    Mr. LoBiondo. Mr. Carson.
    Mr. Carson. Thank you, Mr. Chairman.
    Mr. Dillingham, Dr. Dillingham, thank you and welcome back. 
Please tell us, sir, more about what your study uncovered about 
alternative methods for collecting the passenger facility 
charges without really including these charges in the ticket 
price. Practically, what would you recommend we consider?
    Dr. Dillingham. Thank you, Mr. Carson. We completed that 
study for this committee basically, responding to the question 
that you posed about alternative ways to collect that PFC. We 
did not find any other ways at this point that was more 
efficient for collecting PFCs. We looked at things like 
smartphone apps, kiosks. All of those kinds of things had an 
impact on the convenience of the passenger.
    So, you know, the current system was the most efficient one 
that we have seen. We are now looking at it again, since we 
finished that last study, are there ways in which that fee 
could be collected that is different than what we looked at 
before in addition to those other questions regarding PFCs in 
terms of, you know, what are the various scenarios that 
Congress should have in mind as they think about this for 2015.
    Mr. Carson. Secondly, and more generally speaking, in the 
great Hoosier State of Indiana, our airport directors recently 
briefed our delegation on their consensus about the need for 
Congress to raise the cap on passenger facility charges.
    Now, they are being as creative as possible to finance the 
critical infrastructure projects needed across the State, but 
it is simply not enough.
    First, what do you all think is possible, even realistic 
for that matter, for our local airports to make infrastructure 
improvements without raising their PFCs?
    And secondly, if you agree that PFCs need to be raised, how 
should that be done and what do you recommend in this context?
    Dr. Dillingham. Well, I can just speak just a little bit 
about Indianapolis. Indianapolis is one of the poster-card 
airports for nonaeronautical revenues in terms of the unique 
sorts of things that they are doing.
    Indianapolis, along with Denver, is one of those airports 
that are starting to develop solar farms to provide energy as 
well as sell that energy along the way. So to that extent, I 
mean, that is one other avenue that, you know, Indianapolis is 
a leading actor in.
    Mr. Carson. All right. Thank you, Dr. Dillingham.
    Thank you, Mr. Chairman, I yield back.
    Mr. LoBiondo. Mr. Webster.
    Mr. Webster. Thank you, Mr. Chairman.
    Mr. De Leon, are airports eligible for TIFIA loans?
    Mr. De Leon. No, that is a separate funding program 
administered by the Department of Transportation.
    Mr. Webster. So is that by policy or by statute that they 
would keep them from being eligible?
    Mr. De Leon. I would say it is statute, but I will check on 
that and get back to you.
    Mr. Webster. Dr. Dillingham, you had mentioned that NextGen 
potentially would exasperate the fact of a lack of facilities 
at particular air sites, airports because, I assume, that more 
efficiently and maybe even more frequently planes could land 
and yet there might not be a terminal to accommodate them, 
which would call for, I assume, more infrastructure as you put 
it, concrete at that location.
    Is there any study that you have done on the return on 
investment of every dollar, let's say, is spent at an airport; 
is there some sort of factor like 7:1, 6:1, or anything like 
that?
    Dr. Dillingham. Congressman, we have not done any studies 
like that, but I am familiar with many metropolitan areas where 
airports are located. They have conducted those studies to talk 
about the economic impact of their airport and aviation to the 
community, and you know, and we can provide, you know, 
references to those if you would like, but we have not done any 
studies like that directly.
    Mr. Webster. Well, it was asked earlier, I believe, 
something about, you know, where do we get the bang for the 
buck, and where are the priorities? I think it would behoove us 
to know if this would be the very best investment of our 
infrastructure dollars maybe here. I don't know that it is, and 
maybe no one does, but it certainly would be nice to know.
    Dr. Dillingham. Yes, sir.
    Mr. Webster. Yield back.
    Mr. LoBiondo. Mr. Davis--Mr. Williams.
    Mr. Williams. Thank you, Mr. Chairman.
    I am from Texas. We have got a lot of airports there, and 
we appreciate you all being here today.
    My first question would be to you, Dr. Dillingham. You said 
that airports are seeking great--more private sector 
partnerships. I am a big private-sector guy. I believe in the 
private sector, everything from construction to ownership of 
terminals. We talked about that. What are the implications in 
Federal funding for an airport with various levels of 
privatization, such as long-term leases and public-private 
partnerships?
    I guess my question would be, will Federal funding still be 
needed or required if we really get engaged with the private 
sector and let the private sector move us forward on this?
    Dr. Dillingham. I guess the best answer is, it depends. 
Depending on the arrangements, the privatization type 
arrangement, long-term lease or full sale, those airports will 
still be eligible for certain Federal funds.
    The airport that was mentioned, the only airport that has 
been privatized to date is in San Juan, and, you know, as a 
result of that, that airport has been upgraded.
    Mr. Williams. So the more private-sector involvement would 
decrease the need for Federal funding?
    Dr. Dillingham. I think so.
    Mr. Williams. That is a good thing.
    Dr. Dillingham. Yeah, that is a good thing.
    Mr. Williams. OK, thank you for that.
    Mr. De Leon, my question would be, I am glad that we got $4 
billion in cash. As a small business owner that is important, 
cashflow is important. But my question to you with would be, 
and we talked about this, but the current funding stream, is it 
enough now to sustain all of the demands we are looking forward 
for? I mean, is it----
    Mr. De Leon. If you look at our NPIAS, National Plan of 
Integrated Airport Systems report, it implies that we are not 
meeting all of the demand out there. There is more demand than 
we have funding for. But, as Mr. Dillingham mentioned, we are 
looking at what is really needed today and that is how we 
approach demand with our airport sponsors. We try and work with 
them on what is really needed today and not just plan.
    We manage demand the best we can, but there is more demand 
than there is funding available.
    Mr. Williams. We talked a lot about available funding, but 
as a business person, you know, you can generate cash through 
more business, or I guess you can raise prices which sometimes 
is not the best thing, or you can cut expenses.
    So I guess my question to you would be, you know, since 
September of 2008, small business owners have really had to cut 
back. They have had to cut back on a lot of things to create 
their own cashflow and continue to do business. What are you 
all doing to cut expenses and pass that on to the consumer?
    Mr. De Leon. So within the FAA, what are we doing to cut 
the expenses? In my organization, to maximize the use of the 
AIP dollars as much as we can, we work with airport sponsors to 
possibly phase out projects over a longer time, which is not 
always good, but not a bad way to proceed because you have a 
limited amount of money.
    Our organization is not streamlining people, retiring 
people, if that is what you are leading to. We work with the 
AIP program as best as we can to maximize the return on it.
    Mr. Williams. But are there costs you can cut that would 
turn into cashflow and turn into giving people more service and 
better service? Every business has a surplus of whether it be 
people, or costs. I mean, every business needs to be able to 
cut costs and that was my question. I mean----
    Mr. De Leon. I don't think I could answer the question in 
terms of cutting costs. We are trying to improve efficiencies 
on what we have.
    Mr. Williams. OK.
    Mr. De Leon. As a business you try to maximize your 
efficiency as best as you can. We are looking at ways to become 
more efficient in the way we administer the program.
    Mr. Williams. OK, thank you very much.
    I yield back.
    Mr. LoBiondo. Mr. Davis.
    Mr. Davis. Thank you, Mr. Chairman, and thank you, Dr. 
Dillingham, and Administrator De Leon for being here today.
    I just have one question for both of you. The American 
Association of Airport Executives is represented on the next 
panel and in their testimony, they cite a study that says in 
the next 5 years, 24 of the top 30 airports will experience 
Thanksgiving-like passenger levels at least 1 day a week, and 
as a passenger who travels during the holidays, I know that can 
be daunting.
    Can both of you address this statistic and then what is 
being done now and what more could be done to prepare for such 
passenger levels at those airports?
    Dr. Dillingham. Mr. Davis, I can't refute or support the 
AAAE's numbers, however, you know, over time the delay factor 
for airports has declined. It used to be one in every four 
flights was delayed. FAA has made significant improvements on 
that.
    Going forward, I think we are all relying on the 
implementation of NextGen and the procedures that are 
associated with it, both on the ground, and the technology 
associated with GPS. I think that's where our hope is at this 
point, and, what we are talking about today in terms of having 
the appropriate infrastructure to handle that predicted 
increase in traffic is also an element going forward that 
hopefully will address those issues that AAAE has raised.
    Mr. Davis. OK. Administrator De Leon.
    Mr. De Leon. As Dr. Dillingham mentioned, we are completing 
the future airport capacity task force study known as FACT3. It 
is going to come out in later summer, or early fall. When you 
look at that report there is not going to be any surprises. It 
is going to look forward at operations at the airports for 2020 
and 2030.
    It considers all of the improvement that is in the pipeline 
for these airports, and also considers NextGen technology that 
will be on board at that point in time. When you look at it, 
you will see that for the first decade, the hub system overall 
is in fine condition.
    When you look at 2030, there are many unknowns because of 
all of the things that are happening in the aviation industry 
right now, so we can't predict with certainty what is going to 
happen in 2030. As we move to 2030, our thought is that we are 
going to approach that cautiously in the planning process and 
keep an eye on the system going forward.
    Mr. Davis. All right, well thank you both for your time 
today.
    I yield back Mr. Chairman.
    Mr. LoBiondo. Mr. Duncan.
    Mr. Duncan. Well, thank you very much, Mr. Chairman.
    Dr. Dillingham and Mr. Capuano mentioned that he and I and 
several others met yesterday with some of the top people from 
Wall Street, and they said that they were finding more interest 
and receiving many more phone calls about public-private 
partnerships in regard to infrastructure than ever before, in 
fact, they were surprised by the amount. Do you think that--and 
many other--most other developed or developing countries have 
been going more in that direction than we have.
    Do you think that we will be seeing much more of that? We 
met after the meeting with the Wall Street people. We met with 
the LaGuardia officials yesterday afternoon and they told us 
some of what they were doing. Do you see more of that in the 
future and then secondly, in a related part of that, why do you 
think there was so little interest to the privatization pilot 
program that we had in the 1996 law? You mentioned the San Juan 
Airport, and you said that that has been very successful, but 
it has not gone beyond that. Now, why do you think that is? I 
guess two questions there really.
    Dr. Dillingham. Thank you Mr. Duncan.
    Yes, I would predict that we would see more private-sector 
involvement in infrastructure development. In the LaGuardia 
case, as was said earlier, it was the most efficient and easy 
way to get the job done in terms of waiting on the availability 
of Federal funds, or other funds.
    The privatization program, FAA's airport privatization 
program has been available for more than a decade. It had a 
space for 10 airports of different sizes to participate in the 
program. There have been 10 applicants over that time period, 
and they have withdrawn those applications to the point that we 
only have the San Juan example.
    Part of the problem that we are seeing, again, this is 
another study that is ongoing for this committee. But part of 
the problem that we are seeing is that privatization of 
airports is a really complicated process in the United States, 
as opposed to in other countries where you don't have as many 
stakeholders that you need to deal with.
    When we asked Wall Street about privatization, they said 
they are competing interests among all of the stakeholders. The 
airlines need something, the airport need something, the 
private investor needs something. So you know, it has just been 
a difficult slog.
    All of that is a really complicated issue that has made it 
very difficult, but you know, again, we are trying to look to 
see what are those barriers? What are those barriers that 
prevent this from working, and bring that back to this 
committee so that if necessary the committee can make whatever 
adjustments in the statute that they think are appropriate to 
increase the possibility of having privatization.
    Mr. Duncan. All right, well thank you.
    Of course you already have--maybe part of it is that you 
already have so many private businesses operating at the 
airports in the commercial real estate business and fixed-base 
operators and so forth. But thank you very much.
    Thank you Mr. Chairman.
    Mr. LoBiondo. Mr. Ribble.
    Mr. Ribble. Thank you, Mr. Chairman.
    One of the thing that we need more than anything is 
accuracy and in the projections and in the data so that we can 
actually evaluate how we are going to go ahead and either 
modify or provide current financing.
    Dr. Dillingham, in your written testimony I am quoting from 
page 5, you say: ``In addition, according to the most recent 
FAA forecast air traffic demand is projected to increase 2.7 
percent per year from 2014 through 2034. Funding for both AIP 
and PFCs is linked to passenger activity. In this way, Congress 
aims to direct funds to where it is needed most.''
    Have you done any analysis to determine whether the 
projections from, or the forecast from FAA are accurate?
    Dr. Dillingham. We have looked at some of FAA's forecasts 
in various arenas and as you know, the further out you go with 
the forecast, the less reliable it becomes.
    So in the case of FAA's forecast for infrastructure needs, 
the fact that they do it over a 5-year period with a relook 
every other year, makes it a lot more--as accurate as you can 
be under the circumstances and, you know, if there are no, you 
know, unforeseen circumstances, like we don't have another 
recession, we don't have another SARS epidemic or something 
like that, you know, we are pretty confident at least a year or 
two out in terms of FAA's forecast and with the revisions, you 
know, it is probably as good as can be expected under the 
circumstances.
    Mr. Ribble. Well, Mr. De Leon, let me give you some data. 
In 2001, FAA forecasted U.S. airlines would carry 1 billion 
passengers by 2012. In 2008 the agency pushed that milestone to 
2016, in 2010, it was postponed to 2023, and finally this year 
it was postponed to 2027.
    What methods do you use in your forecast and is there a 
problem in the methodology? If the forecasts are that far off, 
are they still a useful measurement for the Congress to use?
    Mr. De Leon. I am sorry, I will have to get back to you on 
the methods of forecasting. That is not in my area, but I will 
get back to you on the methods used----
    Mr. Ribble. Thank you. I would appreciate that, thank you. 
With that then, not really knowing how you are going about 
that, it is not particularly helpful at this time, but I can 
tell you that we can't make decisions when the data is so far 
off.
    Actual passengers in 2012, by the way, were 730 million so 
the FAA missed that projection by roughly one-third. It creates 
a real problem for us and so the data that is being provided is 
really critical for us to make the right decisions.
    So, Mr. Chairman I yield back.
    Mr. LoBiondo. OK, any further questions for this panel?
    Dr. Dillingham, Mr. De Leon, we thank you very much and the 
first panel is excused.
    We will now take just like a 30-second recess for the 
second panel to get in place.
    Dr. Dillingham. Thank you, Mr. Chairman.
    [Recess.]
    Mr. LoBiondo. Everybody ready? OK, we will reconvene.
    I would like to welcome our second panel. The second panel 
includes Mr. Mark Baker, president and CEO of Aircraft Owners 
and Pilots Association; Mr. Todd Hauptli, president and CEO of 
American Association of Airport Executives; Ms. Sharon 
Pinkerton, senior vice president of legislative and regulatory 
policy for Airlines for America; AND Mr. Mark Reis, chairman of 
the board of directors of Airports Council International--North 
America, and managing director for Seattle-Tacoma International 
Airport.
    So we welcome you, and Mr. Baker, we are waiting for your 
statement.

TESTIMONY OF MARK BAKER, PRESIDENT AND CEO, AIRCRAFT OWNERS AND 
 PILOTS ASSOCIATION; TODD HAUPTLI, PRESIDENT AND CEO, AMERICAN 
  ASSOCIATION OF AIRPORT EXECUTIVES; SHARON PINKERTON, SENIOR 
VICE PRESIDENT, LEGISLATIVE AND REGULATORY POLICY, AIRLINES FOR 
AMERICA; AND MARK REIS, CHAIR, AIRPORTS COUNCIL INTERNATIONAL--
     NORTH AMERICA, AND MANAGING DIRECTOR, SEATTLE-TACOMA 
                     INTERNATIONAL AIRPORT

    Mr. Baker. Thank you leadership and the Members. I 
represent the Aircraft Owners and Pilots Association, and as an 
experienced aviator who has had the opportunity to land in over 
50 States in this beautiful country, I also represent a 
business background in making decisions about things that go on 
in and around aviation communities.
    AOPA has over 350,000 members nationwide, is a nonprofit, 
individual membership organization. AOPA's mission is to 
effectively represent the interests of its members as aircraft 
owners and pilots concerning the economy, safety, utility and 
the popularity of flight of general aviation aircraft. As 
pilots flying in the United States, we are fortunate to have 
access to the safest and most efficient air transportation 
system in the world. The aviation network of over 5,200 public-
use airports complemented by more than 13,000 privately owned 
landing facilities is a unique national resource. General 
aviation is a significant economic engine that contributes $150 
billion to the annual gross domestic product and approximately 
1.2 million jobs in communities nationwide. Each year 170 
million passengers fly using personal aviation, the equivalent 
of one of the Nation's largest airlines, almost 20 percent of 
all airborne passengers.
    In addition to directly creating jobs, the general aviation 
airports attract businesses to the communities where they are 
located, delivering economic benefits far outside the airport 
boundaries. They may serve as a reliever airport in congested 
metropolitan areas offering aircraft, including airliners, a 
safe place to land in the event of an emergency.
    America's airports are the true backbone of aviation, and 
without a robust network, aviation cannot continue to grow. It 
is important to note that all of the new technologies and 
capabilities under discussion with NextGen will be 
underutilized unless pilots have a place to take off and land. 
America's GA airports foster air transportation and link many 
communities to our aviation system in many ways that cannot be 
achieved by the reliance on a few hundred primary airports. Of 
the 3,300 airports included in FAA's National Plan of 
Integrated Airport Systems--NPIAS--only 499 support scheduled, 
commercial air service.
    For many other aviation needs, Americans rely on the other 
2,563 public-use landing sites to link America's vast rural 
expanses to the larger world.
    GA airports support a wide range of other vital activities 
including agriculture, law enforcement, emergency medical 
transportation, firefighting, pipeline patrol, environmental 
monitoring, package delivery, wildlife management, and tourism.
    The broad range of humanitarian and charitable activities 
also rely on general aviation airports. Small general aviation 
airports are frequently used to deliver humanitarian aid 
following natural disasters such as hurricanes or earthquakes. 
In addition, general aviation aircraft operating from small 
airports are routinely used by charities to connect wounded 
veterans to their families, bring patients specialized medical 
care, and perform dozens of other humanitarian and charitable 
services.
    Airports are critical to the aviation transportation 
system, similar to the on-and-off ramps of our Federal highway 
system. Congress has wisely recognized that a Federal aviation 
network is only possible by using tax revenues from various 
parts of the system for financial support. To illustrate how 
similar this is to other modes, if Federal highways had been 
built in only those States that have contributed since 1956, 
the interstate and U.S. highway system would only exist in 15 
States. Drivers in those States have in essence ``subsidized'' 
Federal-aid highway construction in the other 35 States and the 
District of Columbia.
    AOPA strongly supports the financing approach of using the 
time-tested systems of passenger transportation and aviation 
fuel taxes in combination with the general fund tax revenues to 
support the FAA and the aviation system.
    Funding for the Airport Improvement Program--AIP--comes 
from the FAA's Airport and Airway Trust Fund, which receives 
revenues from a series of excise taxes paid by users of the 
National Airspace System, including taxes on aviation fuels. 
The trust fund was designed to finance investments in the 
airport and airway system, and to the extent funds were 
available, cover the operating costs of the airway systems as 
well.
    However, no general fund revenues are appropriated to 
support AIP. The Airport Improvement Program provides grants to 
public agencies, and in some cases, to private airport owners 
for the planning and development of public-use airports that 
are included in the NPIAS, which is developed by the FAA and 
submitted to Congress every 2 years. The AIP grants for 
planning, development, or noise compatibility projects may go 
to these federally identified public use airports including 
heliports and seaplane bases. For small primary, reliever, and 
general aviation airports, the grant covers 90 percent of 
eligible costs.
    Projects eligible for AIP grants include improvements that 
enhance the airport safety, capacity, and security, or meet 
environmental needs.
    Without the assistance of Federal funding, many small 
airports could not perform the necessary maintenance projects 
to ensure runway safety, provide airport lighting, or offer 
essential services like hangars and tie-downs.
    The FAA's most recent NPIAS report to Congress indicates 
that America's airport infrastructure needs are significant. 
Over the 5 years from 2013 to 2017, FAA estimates that airports 
will require $42.5 billion to meet all AIP-eligible 
infrastructure demands; significantly more than the authorized 
level in the AIP funding for that period. Despite the growing 
need, AIP funding remained at annual levels of roughly $3.5 
billion since fiscal year 2005, until it took a slight drop to 
$3.35 billion. Based on these numbers, it is clear that the 
need and the annual funding levels are out of balance, and all 
the while projects continue to manifest.
    In conclusion, general aviation airports play a vital role 
in the life of this Nation. The need for infrastructure, 
security, environmental improvements, and safety are important 
and continues to grow. On behalf of more than 350,000 members 
of AOPA, we appreciate your leadership in addressing the 
funding concerns of general aviation so our national 
transportation system can continue to serve the economic, 
social, and humanitarian needs of this Nation. Thanks for the 
opportunity to contribute.
    Mr. LoBiondo. Thank you.
    Mr. Hauptli.
    Mr. Hauptli. Mr. Chairman, thank you for the opportunity to 
be here today. It is always good to be back before the 
committee.
    I have two fundamental points I would like to make this 
morning. One: Airports need more resources. As frequent 
travellers, you all know that the airports are teaming with 
people in the terminals and on the tarmacs. There are 
facilities that need upgrade and upkeep. Many of these 
facilities designed and constructed at the dawn of the jet age.
    Do any of us in this room really believe there will be less 
traffic in the future than there is today in an already 
constrained environment? I think not. Near-term Band-Aid 
approaches aren't going to serve the long-term needs of the 
passengers, our communities, or future generations, and we have 
neglected infrastructure investments across all modes of 
transportation for too long. Good enough for now isn't good 
enough. My members have an obligation to plan for tomorrow.
    Point two: The passenger facility charge is the best 
mechanism to deliver this additional resource in today's 
current budget environment. In the absence of increased Federal 
funding, the best way to close down this airport infrastructure 
development gap is to increase the passenger facility charge, 
to give the airports the self-help they need to get the job 
done. The Federal cap on local PFCs was last increased in the 
year 2000, 14 years ago and to the Members on this side of the 
dais, I would say in light of tomorrow's vote, I would observe 
that in light of tomorrow's vote for the majority leader and 
the majority whip positions, the last time Congress increased 
the passenger facility charge it was under the watchful eye of 
Dick Armey as majority leader leader and Tom DeLay as majority 
leader whip, two conservative Republican Members who understood 
the difference between a tax and a user fee, like all of this 
committee does intuitively, and Mr. Farenthold mentioned that 
earlier this morning.
    In the intervening 14 years, the purchasing power of the 
PFC has diminished dramatically from $4.50, to less than $2.50. 
We are asking this committee to increase the passenger facility 
charge to $8.50 with periodic indexing for inflation. That will 
simply restore the purchasing power of the PFC that has been 
lost over the years, and remember, PFCs are locally imposed, 
locally justified, locally collected, and locally spent in 
their communities to meet the pressing needs for future growth.
    Now, we recognize that an increase in the passenger 
facility charge is opposed by our colleagues in the airlines, 
who contend that infrastructure needs are being met and that an 
extra $4 in fees would significantly decrease demand for air 
travel. Well, just this morning in the newspaper I saw that in 
the last month alone, airline fares increased 6 percent, the 
single largest increase in the past 15 years and if you looked 
at May 2013 to May 2014, fares have increased by 5 percent.
    Now, under the airline logic, where they say that for every 
dollar, or for every 1-percent increase in fares there is a 
greater than 1-percent decrease in demand for air travel, if 
that were to be true, clearly we should see a greater than 5-
percent decrease in air traffic as a result of the past year. 
However, traffic hasn't gone down. Demand hasn't gone down. It 
has gone up and so it is time to lay to rest this elasticity of 
demand argument as it relates to the passenger facility charge 
and we haven't even mentioned of course the issue of bag fees 
and a $25 or $30 bag fee and its impact on travel.
    Mr. Chairman, there is clearly a difference of opinion 
between airports and our airline partners on the status of 
airport financing in the path forward. I believe that 
difference can best be explained by the fact that the airlines 
view the world in a 90-day increment. What is the next 
financial statement for their shareholder report.
    Airports have an obligation to look to the future. It takes 
2 years and 3 years and 5 years and sometimes 10 years and 
longer to build major infrastructure projects in this country. 
An airport has to look out for the long-term interest of its 
community. The tension between these two positions, between the 
airports and the airlines is understandable, but we need you as 
policymakers to recognize the difference between these two 
viewpoints, and make decisions that are in the long-term, best 
interest of the country.
    Again, two simple points: One, we need more resources. And 
two, the passenger facility charge is the best mechanism to 
deliver those additional resources. Thank you.
    Mr. LoBiondo. Thank you.
    Ms. Pinkerton.
    Ms. Pinkerton. Thank you, Mr. Chairman, and Mr. Ranking 
Member, I appreciate the opportunity to be here today to 
discuss the state of airport financing.
    From A4A members' perspective there are three overarching 
considerations in evaluating airport infrastructure and 
financing needs. First, airlines need infrastructure. We more 
than any other stakeholder must have sufficient resources to be 
able to meet the needs of our customers efficiently and 
effectively. We work in close collaboration with airports large 
and small in order to make sure that necessary capital projects 
are funded.
    Second, U.S. airports enjoy consistent and reliable access 
to ample and an enviable variety of financial resources to pay 
for airport projects. There is no current or foreseeable crisis 
in airport funding, in sharp contrast to the issues you are 
dealing with the Highway Trust Fund today.
    And third, funding policy should be driven by airport 
development needs. This demand focused approach has repeatedly 
demonstrated projects can be paid for within existing financing 
means. There is simply no empirical justification to raise 
airport-related taxes, especially when revenue from other 
resources is so abundant.
    The U.S. airline industry in collaboration with our airport 
partners has been supporting investing in billions of dollars 
of airport infrastructure. These investments have accelerated 
in the past few years and are made possible by our improving 
finances in places such as JFK, Miami, San Diego, Houston, and 
other areas.
    A financially healthily airline industry also translates 
into an especially healthy airport trust fund which has enjoyed 
record-high revenues from commercial sources. We had a record-
high $12.7 billion in revenue in 2013 and the highest 
uncommitted balance in over 13 years. That is $5 billion at the 
end of 2013 and it is projected to be $6 billion in 2014.
    Airline airport collaboration has worked well. U.S. 
airlines enthusiastically support necessary airport improvement 
projects. In fact, we are in the midst of massive 
infrastructure investments across the country as seen in some 
of the slides above. This has occurred in close collaboration 
with airports and has yielded results we can all be proud of. 
Since 2008 the largest 29 airports alone have started or 
completed $52 billion worth of capital projects. That is new 
runways, new international passenger facilities, and new or 
substantially renovated terminals at both large and small 
airports.
    Let's talk about how airports are doing. In 2013 airports 
collected nearly $24 billion in revenues. A record-high level, 
part of that is the PFC, $2.8 billion. Part of that is the AIP 
program, $3.35 billion. That is especially helpful for smaller 
GA airports, and then U.S. airports actually have $10 billion 
on hand in cash in investments. All of these numbers point to a 
financially strong airport community. Standard & Poor's gives 
every single airport it evaluates investment grade credit 
ratings. Airports and airlines have been able to take advantage 
of those credit ratings to secure affordable funding for 
demand-driven financially justified projects that increase 
capacity and efficiency.
    Let's talk about air travel for a moment. The current 
number of operations today is still lower than what we had in 
2007 and the FAA projects that we won't be back to those 2007 
level of operations until 2033. So while airport projects will 
continue to be necessary, the airport system in the United 
States does not have to build to accommodate rapid or 
unmanageable growth. Improvement projects can be paid for with 
existing revenue streams with no need to pursue an increase in 
the PFC.
    Bonds remain the primary source of funding for airport 
capital projects. Historically, and even today where 50 percent 
of all projects are funded through bond funding. Airports enjoy 
access to bond financing at very good rates because of their 
good investment credit ratings. No U.S. airport to our 
knowledge, has been unable to secure bond funding for an 
airport improvement project.
    Another reason not to increase the PFC is that U.S. 
airlines and their customers already pay over $19 billion in 
taxes and fees, soon to be $20 billion once the TSA fee goes 
into effect next month. We are already taxed at a rate higher 
than alcohol and cigarettes, products that are taxed to 
discourage their use. We have heard every dollar in the PFC 
means $700 million cost to the passenger. Raising the PFC cap 
hurts demand, hurts traveling tourism, and negatively impacts 
small community service. While it is intuitive that raising the 
cost of something results in less of it, the GAO has also found 
in 2012 that increasing ticket taxes in the price by 1 percent 
results in 1 percent--greater than 1 percent fewer tickets 
being sold.
    In conclusion, today we have a win/win formula, that 
provides for needed infrastructure, funding, and consists of 
close collaboration with airports, disciplined demand-driven 
development of infrastructure projects, continued reliance on 
tried and true funding sources, and avoiding punishing the 
traveling public with additional taxes. We need to stick with 
that formula.
    Thank you.
    Mr. Ribble [presiding]. Thank you.
    And Mr. Reis, you can go ahead with your testimony.
    Mr. Reis. Thank you, Mr. Chairman and Ranking Member Larsen 
and members of the subcommittee. Thank you for inviting me to 
participate in today's hearing.
    The airport community appreciates the opportunity to 
explain the state of airports and our challenging capital 
needs. The significance that both ACI-NA and AAAE are 
representing here today are two organizations are unified in 
our efforts on the upcoming FAA reauthorization particularly 
when it comes to airport financing. So I am very pleased to 
have the opportunity to speak today with our partner Todd 
Hauptli.
    I am the managing director of the Seattle-Tacoma 
International Airport, and I am here today in my capacity as 
chairman of Airports Council International--North America. In 
addition to my testimony today please accept my written 
statement which offers a fuller overview of the complexities of 
airport finance, the sources and uses of airport revenues, and 
the financial challenges airports face today.
    As has been established, airports are hubs for economic 
growth within local communities across our Nation, U.S. 
airports, though, lack the ability to raise the revenues 
necessary to meet our industry's current and future challenges. 
The Federal component of our funding model which relies most 
heavily on the underfunded Airport Improvement Program, and the 
undervalued passenger facility charge user fee is antiquated 
complicated, tightly regulated, and not sustainable as we plan 
for the future.
    In the United States, the average airport facility is more 
than 40 years old, it is growing increasingly difficult for us 
to balance maintenance costs and expansion plans with limited 
financing options. We have identified more than $71 billion in 
capital improvements for security, safety, rehabilitation and 
facilitation needs that are essential over the next 5 years. 
Examples include a $95 million runway safety area at Oakland, 
and a $100 million runway reconstruction project at Sea-Tac.
    The limited AIP and PFC funding capacity available is only 
a fraction of our overall need. Especially with so much of 
future airport revenues including the PFC user fee already 
pledged to existing debt service. The challenge for Congress, 
the airports and our airline partners will be to find a so luck 
that addresses the need in a practical and a sustainable way. 
We believe that restoring the purchasing power of the PFC user 
fee to $8.50, and indexing it to inflation is the best solution 
but it is not the only possible solution to this challenge.
    Congress could increase AIP funding to go meet the urgent 
infrastructure needs of America's airports, but that would 
require at least a doubling of the annual AIP appropriation. So 
while increasing AIP is certainly an option in theory, we 
understand the congressional focus on decreasing Federal 
spending and its lack of interest in increasing Federal 
aviation taxes makes this option unrealistic.
    The U.S. aviation industry faces a global challenge. U.S. 
airports need to stay competitive. Airports in Canada, in 
partnership with their airline customers have implemented 
passenger user charges known as the airport improvement fees 
otherwise called AIF, in order to fund needed airport 
construction and improvements. But unlike the PFC, these fees 
are not capped by the Canadian Federal Government. The AIF at 
some Canadian airports is as high as $30 per passenger. While 
this is another alternative, we believe the PFC can be updated 
for a fraction of the Canadian AIF by restoring its purchasing 
power and periodically adjusting it for inflation.
    Which brings us back to what I indicated previously to the 
best alternative. By restoring the spending power of the PFC 
user fee, this Congress can craft a solution that will allow us 
to meet the critical infrastructure of Americans airports and 
do it cost effectively for airports, airlines, and our 
passengers. Updating the PFC user fee also increases local 
control and puts decisions into the hands of local authorities 
who are best able to determine the level of user fee which is 
appropriate for their community. By raising the cap of the PFC, 
this Congress can ensure that our airports continue to be 
engines of economic growth in their respective communities and 
across the country.
    This subcommittee will have a significant impact next year 
on the future of airport financing. The airport community 
remains committed to working alongside you and other aviation 
shareholders to develop a sustainable means to satisfy the 
demands of 21st-century traveling public.
    I look forward to your questions.
    Mr. Ribble. Well, thank you all for your testimony.
    By the way, my name is Reid Ribble. I represent Wisconsin's 
Eighth Congressional District. So it has Appleton and Green 
Bay, Wisconsin.
    Thanks for your testimony.
    Mr. Baker, I am going to start with you if I could. Could 
you give us an idea of the cost of general aviation to the 
pilots? What types of fees are they paying, and what is the 
work that goes into being a general aviation pilot and the 
costs related to that?
    Mr. Baker. First, the cost of acquiring a pilot's license 
would be where most people start. We graduated about 22,000 
pilots last year. Some will head off into commercial aviation. 
Some are just training for recreation or business aviation. We 
think about the basic license of a private pilot today running 
anywhere from $7,000 to $10,000 just to get your first primary 
license. If you are advancing all the way up into a commercial 
pilot's license, you can expect to pay between $80,000 and 
$100,000 to gain that education and experience today. So it is 
very expensive.
    And the fees associated with flying today are fuel taxes, 
which we think are a very efficient way, by the way, to pay 
into the system. The more you fly, the more you pay, and this 
is the best model for general aviation.
    But there are other fees and taxes that are starting to 
creep into the system. In many cases there are landing fees, 
service fees, and a host of other costs associated with using a 
facility at a general aviation airport.
    In many cases, we have a choice to avoid those additional 
expenses and go to smaller airports which don't charge those 
fees, and I think you are starting to see a population of 
pilots that move in that direction.
    Finally other costs for services, such as getting your 
weather and getting your mapping, are required purchases for 
most pilots. Whether one uses either a service online, or buys 
physical maps and charts, currently it can be $1,000 or more a 
year.
    Mr. Ribble. Thank you very much.
    Mr. Hauptli----
    Mr. Hauptli. Yes, sir.
    Mr. Ribble. Look at the PFC cap, you advocate raising the 
cap to $8.50, and then indexing it. How is that cap actually 
assessed? Let's say someone like me flies from Green Bay, 
Wisconsin, to Chicago, and then from Chicago to Houston.
    You have got a takeoff in Green Bay, a landing in Chicago, 
a takeoff in Chicago, landing in Houston; and then return, 
takeoff in Houston, landing in Chicago, takeoff in Chicago, 
landing in Green Bay. How many times is that fee assessed?
    Mr. Hauptli. Not more than twice in each direction.
    Mr. Ribble. OK, so not more than twice in each direction--
--
    Mr. Hauptli. That is correct.
    Mr. Ribble. Or twice in each direction?
    Mr. Hauptli. Yeah, it would depending on whether or not the 
airport had a PFC imposed at that airport.
    Mr. Ribble. OK, in this case, O'Hare and Houston 
International, and Austin Straubel in Green Bay.
    Mr. Hauptli. In the case that you cited, now that Houston, 
in fact, has a PFC in place which it did not for many years, 
there would be a PFC imposed in Green Bay for taking off there, 
and then again in Chicago----
    Mr. Ribble. OK.
    Mr. Hauptli [continuing]. On the way. And then on the way 
back it would be in Houston and then again in Chicago.
    Mr. Ribble. In Chicago. All right, thank you. Do you have 
an opinion, or would you agree that there is elasticity of 
price in the marketplace? Do you make decisions of purchasing 
based on price?
    Mr. Hauptli. Yes, in a conceptual way I agree there is an 
elasticity argument to be made, conceptually.
    Mr. Ribble. OK.
    Mr. Hauptli. And if I may----
    Mr. Ribble. Yeah, Please do.
    Mr. Hauptli [continuing]. And I am glad that the chairman 
is back because he raised this issue earlier this morning.
    Mr. Ribble. We are all glad that the chairman is back.
    Mr. Hauptli. He asked about elasticity of demand and the 
airlines contend that for every 1-percent increase in fare 
prices, there is a greater than 1-percent decrease in demand 
for air travel. However, in the past year from May of 2013 to 
May of 2014, airline fares increased 5 percent.
    Now, you would expect based on this elasticity of demand 
argument that they put forward, that there would be at least a 
5-percent reduction in demand for air travel. However, what we 
have seen over the past year is an increase, not a decrease, 
but an increase in air travel, so that elasticity of demand 
argument doesn't work very well, at least in that example.
    Mr. Ribble. Ms. Pinkerton, how do you answer that?
    Ms. Pinkerton. I'm happy to answer that. Thank you.
    First of all, it is not the airlines that argue about price 
elasticity. It is every economist that studied the topic that 
acknowledges that there is, definitely, when you increase the 
cost of something, people buy less of it. So it is interesting 
what Todd is discussing about airfares going up.
    First of all, it is important to remember, since 2000, in 
real terms, airfares have actually dropped 10 percent. That is 
when adjusted for inflation. So in the big picture airfares are 
affordable and they are a real value. Yes, airfares have gone 
up in 2013, 5 percent. That is a good thing. It is a good thing 
because when carriers are able to recognize revenues from a 
route, what do they do with that revenue? They plow it back 
into the route. So they may increase service, which I know all 
of you are interested in increasing service to your community. 
They may upgauge the plane, et cetera.
    In terms of the elasticity of demand, our fares have gone 
up a bit. The demand has probably not gone up as much as it 
would have. In other words, there is still an impact, yes. 
There may be increasing demand, but it is not going up as much 
as it would have, had there not been increased costs.
    The important thing to remember here though is, the 
difference between an increase in an airfare, and an increase 
in a PFC. So the PFC is a mandatory and systemwide increase in 
the cost. The airfare, on the other hand, is a flexible tool 
when the economy softens, or fuel goes over the roof, airfares 
can be pulled back down, and they often are pulled back down. 
But when you increase the PFC, I can guarantee you it will 
never go back down.
    Mr. Ribble. I am going to, one last question for you, Ms. 
Pinkerton, and then I'm going to turn it over to the ranking 
member. But the majority of PFC applications by airports are 
submitted to the FAA without airline objections. Can you 
explain why airlines are generally supportive of specific 
projects, but are opposed to raising the cap?
    Ms. Pinkerton. Sure I can. I think what I have tried to lay 
out in my testimony, is that what we see is airports have a 
toolbox of tools for funding airport infrastructure. And there 
is an abundance of resources right now. By the end of 2014, 
there is going to be $6 billion of uncommitted trust fund 
balance. So PFCs were created as one tool in the toolbox and as 
I said, and I showed the $52 billion with the projects that we 
have supported over the past 5 years, we do support 
infrastructure projects. We need those projects, and we work 
collaboratively with airport partners on PFC projects.
    So while we do work collaboratively with them, what we are 
seeing is that going forward because of the resource situation 
that we are in right now with a $6 billion uncommitted balance, 
with all-time record revenues from commercial carriers and 
their passengers, all-time record revenues for nonairline 
revenues, there is really no point in increasing the PFC. You 
would simply be punishing the passenger who is already paying 
$19 billion, soon to be $20 billion while there is an abundance 
of resources available to fund needed projects.
    Mr. Ribble. All right, thank you.
    With that I yield to the ranking member, Mr. Larsen.
    Mr. Larsen. Mr. Reis, thanks for making the trip. I 
understand you have to leave about 1 o'clock.
    Mr. Reis. Well, 1:30 is probably good.
    Mr. Larsen. Oh, OK, great. Maybe it is me that has to leave 
at is 1 o'clock. I forget.
    Can you help us understand a little bit about this question 
of bonding capacity, how it is used, and clearly, it has to be 
financed. It is not just you have got bonds and you are given 
the free money and you never have to pay anything back. You 
have to have a source of revenue to pay that back, presumably 
PFCs are included in that package of sources of revenue.
    But if you are limited at $4.50, or if an airport like 
McCarran as you rolled out in your written testimony, and said 
they pretty much maxed out their ability to use PFCs to finance 
anything more. They have to go to other sources. What other 
sources are there and kind of where do those burdens fall?
    Mr. Reis. Thank you. Just like most everything else, life 
is complicated and there is not a single answer, and of course, 
what is true and possible at Sea-Tac Airport, which is one of 
the fastest growing airports in the country where we have 
airlines very interested in coming to Seattle and increasing 
their activity at Seattle, is not going to be true at a smaller 
airport which has lost air service in another part of the 
country and does not have access to necessarily all of the same 
tools.
    So I will talk about it from Sea-Tac's point of view and 
then elaborate a little bit about other airports. So you are 
absolutely right, Mr. Larsen, that the acquisition of funds 
from a bond issue is just a first step in a way to fund a 
construction program. It doesn't have anything to do with the 
ability to pay it back. So for us to borrow the money, we have 
to convince the bankers and the rating agencies that we have a 
long-term stable source of cash to pay back that money.
    It is going to come from essentially one of three places. 
We can put the debt service for the bond repayment into the 
airline rate base, which of course will drive up airline costs 
at the airport. We can utilize nonairline net income to the 
degree we are able to generate that, and we can use PFCs to pay 
debt service and we, of course, could also use PFCs to pay for 
a project on a pay-as-you-go basis, but the most efficient way 
to use PFCs is to use it to pay debt service.
    Mr. Larsen. So nonairline net income would be parking fees, 
concession fees----
    Mr. Reis. Exactly.
    Mr. Larsen [continuing]. The $10 that I pay for a coffee 
there versus the $5 I pay outside of the airport.
    Mr. Reis. I think we have had this conversation before. At 
Sea-Tac Airport, unlike some airports, we do have a street 
pricing point of view. So you are going to pay the same price 
at Sea-Tac inside the airport.
    But the net income after you pay the operating expenses for 
any of those things like concessions and parking, et cetera, is 
one of sources, and it presumably is included in the number 
that Ms. Pinkerton noted, the $24 billion. Well at Sea-Tac, for 
example, we have 36 competitors for our parking operation. We 
are making more than 10 percent less in parking now than we did 
prior to the last recession as a result of the competition.
    So all of these numbers don't just go up, and of course, 
the airlines don't want us to put increased debt service in 
their rate base because that causes their costs to up.
    Mr. Larsen. And just to clarify, that the rate base--so you 
have PFCs, which you hear a lot about, but you have flexibility 
to negotiate with airlines on other fees, landing fees, and 
what else?
    Mr. Reis. Exactly. Landing fees, terminal rents of various 
sorts.
    And each airport has a different relationship legally, 
contractually, from an agreement point of view, with airlines. 
So the ability of an airline or airlines to approve or to veto 
an investment is different, depending on the airport.
    So coming back to the PFCs, we have a $2\1/2\ billion 
capital program scheduled for the next 10 years. We anticipate 
having to borrow well above $1.5 billion of that $2.5 billion. 
At the moment our PFCs are almost completely maxed out, meaning 
fully allocated to existing debt service.
    So when Ms. Pinkerton says that we have lots--``abundant,'' 
I think, is the word--of funding sources, I would--even at an 
airport that is growing, that is in a very vibrant city where a 
lot of airlines want to fly, I would dispute that we have 
abundant sources.
    We are seeing slow growth in nonairline revenue. We are 
maxed out in terms of dedication of our PFCs to existing debt 
service, and we will see the airline fees have to go up 
dramatically to pay for some of this capital program.
    Mr. Larsen. I am going to have to go into detail at a 
different time, not in this hearing.
    But a recent announcement about the international arrival 
facility, Sea-Tac and, presumably, Delta are partnering on 
financing that?
    Mr. Reis. Well, Sea-Tac will be financing it completely. 
Delta is very supportive of it because it is important to their 
growth as an international gateway in Seattle. But that is one 
of the major projects of this $2\1/2\ billion program.
    What is also quite interesting is neither Delta nor Alaska 
Airlines are particularly excited about growing the PFC. That 
said, we have about a $450 million terminal or concourse 
redevelopment project ahead of us that will be fully occupied 
by Alaska Airlines.
    We have an international arrivals facility, about a $350 
million project, that Delta will certainly be just one of many 
airlines using it, but it will have more flights there than any 
of the other airlines.
    They are arguing over how we allocate the limited PFCs that 
we have available to the payment of those two projects. So they 
don't like the PFC, in general, but they like it when it will 
allow them to decrease their terminal rent.
    Because that is, in fact, the real benefit to the airlines, 
is we do not include the cost of debt service in a rate base if 
it is paid for by the PFC. If it is not paid for by the PFC, we 
then charge the airlines for that debt service.
    Mr. Larsen. Another set of questions for Ms. Pinkerton.
    And I am not asking this to be snarky. It might sound like 
it--because I am never snarky--because it has to do with bag 
fees--baggage fees, which is a huge source of revenue--a 
relative source of revenue for airlines, generally----
    Ms. Pinkerton. Six percent.
    Mr. Larsen [continuing]. And this issue of elasticity.
    So is there a price elasticity to bag fees? Have the 
airlines found that?
    Ms. Pinkerton. So I certainly understand the question on 
bag fees, but let me just start with this.
    Mr. Larsen. Start with the answer to my question.
    Ms. Pinkerton. OK. Bag fees--when we fly, we have an option 
about checking bags.
    Mr. Larsen. Right.
    Ms. Pinkerton. You don't have an option about whether or 
not to use an airport.
    Mr. Larsen. Right.
    Ms. Pinkerton. So the unbundling----
    Mr. Larsen. I am getting to the question about dedicating 
that revenue and where that revenue goes.
    Ms. Pinkerton. Right.
    Mr. Larsen. But have you found fewer bags, as a result of 
bag fees, going on airplanes are being checked? I have seen the 
overhead bins. If there is price----
    Ms. Pinkerton. There was a change initially, but now it has 
actually evened out.
    Mr. Larsen. Leveled out?
    Ms. Pinkerton. Yes.
    Mr. Larsen. So the next question I have is: With that 
revenue or any other revenue from airlines, does all that go 
into airline operations, airplane purchases, or is there--given 
this question about P3 financing and so on, do airlines look at 
that as a source of revenue to help then on the development 
side of infrastructure of airports?
    Ms. Pinkerton. It is a great question.
    Mr. Larsen. See, I told you I was getting to a nice place.
    Ms. Pinkerton. Yes.
    And so what you have seen since 2010, since airlines have 
started to make small margins, you have seen us plowing that 
money back into planes.
    So we have got 255 planes that are going to be delivered in 
2014. That is good for customers. Half of those are Boeing 
planes.
    Most importantly, we are starting to hire people. During 
the last decade, when we lost $60 billion, we laid off a third 
of our employees. That was traumatic for all of us. But since 
2010, we have started to build back up our employee base.
    In the last nine quarters, we have consecutively every 
quarter added seats. So that is exactly the kind of thing we 
are doing. We are investing back in CAPEX, is what we call it, 
$12 billion a year in capital expenditures.
    So that is for planes, for WiFi, in-flight entertainment, 
again, our employees, training, baggage systems. We have 
invested, Delta, Alaska. We have invested in baggage systems 
and, as a result, we have a much lower mishandled bag rate 
today than we ever did before.
    Mr. Larsen. You see what I am getting at in terms of trying 
to figure out what are the sources or ideas out there regarding 
investment----
    Ms. Pinkerton. Absolutely. And I think that the $52 billion 
that we have shown that we have invested over the last 5 years 
demonstrates that, when we are able to make small margins, we 
reinvest it back in airport infrastructure.
    Mr. Ribble [presiding]. Mr. Meehan.
    Mr. Meehan. Thank you, Mr. Chairman.
    Mr. Reis, I am particularly interested in your experiences 
in Washington because, obviously, in busy airports, we are 
looking for ways to support the growth, but, also, to make sure 
that the resources that are coming in are going to where they 
are most needed.
    Explain to me the percentages, so to speak, when you talk 
about these other fees that are out there, parking, terminal 
rents, landing fees, concessions, rental cars. I mean, there is 
a whole series of other kinds of things.
    And I always get concerned--maybe it is the cynic in me--
when I see these sort of big municipal airports. There is a lot 
of fat in there. There is a lot of jobs and other kinds of 
things, not performing jobs, but people that are on--how do you 
take parking fees and assure that it is, you know, an efficient 
price?
    I pay a lot to park. You know, people are paying $25, $30 a 
day to park. Concessions. My colleague from Massachusetts was 
concerned about, you know, a lot of money going in to build 
stores that you don't see much traffic in. How are they 
supported?
    So where are the decisions made to assure that the dollars 
that are being raised are actually being put back in where it 
needs to be, which is a significant cost to airline, you know, 
infrastructure improvement?
    Mr. Reis. Well, thank you for the question. It is a very 
appropriate one.
    Let me first reinforce perhaps a little bit more clearly 
than what was stated in the previous panel. We, as airports, 
are not able to use any AIP or PFC money to build any 
nonairline revenue-producing facilities. So no AIP or PFC money 
is ever used for facilities at a terminal in which a retail or 
a dining facility will go. It is just prohibited.
    Mr. Meehan. Well, how is that funded, then?
    Mr. Reis. It is funded through nonairline revenue.
    Mr. Meehan. What is nonairline revenue? And how do we know 
that the moneys aren't getting diverted into that kind of a 
thing when we need that money to go into the ability to put 
down more concrete?
    Mr. Reis. You are absolutely right.
    Congress has been very clear on the subject. The FAA is 
quite clear on the subject.
    We go through an annual audit, not just a financial audit, 
but a complex comprehensive audit that is done for any airport 
that collects a PFC or an AIP.
    Those are the kinds of questions that are asked to make 
sure that no money is diverted from an aeronautical use to a 
nonaeronautical use.
    So our garage, fully funded from different nonaeronautical 
purposes, the debt service on that has to be paid back from 
nonaeronautical services.
    When we build a new facility--I mentioned the 
reconstruction of this concourse--or of our north satellite 
concourse--we will have to demonstrate to the bond community 
and to the FAA what percentage of that reinvestment will be for 
aeronautical purposes, and we have to be very careful to not 
use any money that is associated with the airlines paying us 
back by contract or Federal money or PFC or the----
    Mr. Meehan. So the bottom line is I can look at an audit to 
determine whether there is efficiency with regard to those 
things?
    Mr. Reis. Absolutely.
    Mr. Meehan. Thank you.
    Ms. Pinkerton, I also serve on Homeland Security. And I 
know you are going to be getting a pretty hefty fee coming up, 
almost a billion dollars in new increases because of the pay 
for TSA. I think it has gone from 250 to 650.
    If you include that, you know, the security tax and other 
Federal taxes and fees that are currently paid, how much of the 
fees go to Uncle Sam as opposed to the airport?
    Ms. Pinkerton. Well, there is $3 billion in PFCs that go to 
the airport and then, of course, the $3.35 billion in AIP that 
goes to the airports as well. So that is $6 billion out of the 
$20 billion.
    With the TSA fee increase, passengers and carriers will be 
paying $20 billion in taxes--special aviation taxes every year. 
And so $14 billion goes to Uncle Sam and $6 billion goes to----
    Mr. Meehan. Is this going to have an increase? Do you think 
it is going to have an impact on flight utilization demand 
because of these increases?
    Ms. Pinkerton. Yeah. I mean, as we discussed before, GAO, 
every other economist that has studied the issue acknowledges 
that, when you increase the price of something, you get less of 
it. There is no doubt about that.
    Mr. Meehan. My time has expired.
    Mr. Chairman, thank you. I yield back.
    Mr. Ribble. Mr. DeFazio.
    Mr. DeFazio. Thank you, Mr. Chairman.
    Mr. Chairman, I found the discussion of elasticity 
enlightening, having been an economics major in college until 
one day I woke up and realized it wasn't a science.
    And, you know, I would say that the discussion of 
elasticity sort of leads us there. I just have to follow up a 
little bit. I am sorry.
    But, Ms. Pinkerton, you mentioned average fares are down. 
Does that calculation include--I think the time you quoted was 
when 88 percent of the passenger costs were fares. Now it is 71 
percent are fares. Does that average include the baggage fees?
    Ms. Pinkerton. Yes, it does. Because if I hadn't included 
them, fares would be down 15 percent. Including them, they are 
down 10 percent.
    Mr. DeFazio. Yes. But, of course, remember, it is an 
average fare and it is not evenly distributed. Some regions 
and/or airports have seen increases. Others where there is more 
competition have seen decreases.
    Ms. Pinkerton. True.
    Mr. DeFazio. Now, I am trying--you know, again, as the 
author of the PFC, I am not for indiscriminate raising of fees.
    And as you know, since I am sponsoring the transparency 
bill with the chairman, I went on that because I was upset that 
one of the last budget deals just threw an additional nominal 
cost that is supposedly going to security onto passengers.
    So I believe in having that full disclosure on both sides 
of the ledger, both with the airlines and with the Government 
fees.
    But I think here that--on PFCs, someone raised the point 
that, for the most part, airlines have not objected to the 
specific imposition of PFCs for many projects. Is that is 
correct----
    Ms. Pinkerton. Yes.
    Mr. DeFazio [continuing]. For the most part?
    So, essentially, there are projects that are good that 
utilize PFCs. We had Dr. Dillingham say they haven't been 
abused, which was why the first iteration went away and why we 
rebirthed them with a whole different set of restrictions that 
have been, I think, pretty good.
    But hearing from Mr. Reis, wouldn't you agree that, at some 
point, an airport, which has used PFCs with support of the 
airlines to do meritorious things that improve the customer 
experience in the airline operations, may have bumped against 
the ceiling, may not have other options, and maybe you need 
some flexibility to go a little higher in those cases with the 
PFC?
    Ms. Pinkerton. Well, I don't think you were here for my 
testimony. But we indeed support airport projects. Sea-Tac, we 
were very supportive of the international runway, the 
international facility.
    What we are arguing, Congressman DeFazio, is, yes, we have 
supported these PFC projects, but there is abundant funding 
available, whether it is AIP or bonding, in particular----
    Mr. DeFazio. I read your testimony and I caught some of 
that, if I could just interrupt. But he also pointed out the 
limitations of that, and we don't----
    Ms. Pinkerton. But he is moving forward with the projects.
    Mr. DeFazio [continuing]. Live in the world of abundant 
theory, which I know is a theory out there: If we all think 
positive thoughts, it will happen. But----
    Ms. Pinkerton. But he is moving forward with his projects.
    Mr. DeFazio. Right.
    Ms. Pinkerton. They are moving forward. Nothing has been--
--
    Mr. DeFazio. But there may be cases.
    What I am getting at is the objection of the airlines to an 
increase in the PFC because you think it will be 
indiscriminately applied once it becomes available across the 
industry; and, therefore, virtually everybody is going to raise 
their fee and they are going to do discretionary things that 
they could have done with other money, or they wouldn't have 
done given their limits, that don't benefit passengers and 
operations. Is that the concern?
    Ms. Pinkerton. No. The objection is that passengers are 
already paying too much and there is----
    Mr. DeFazio. But ``too much'' is the whole experience----
    Ms. Pinkerton [continuing]. $6 billion in a slush fund 
available.
    Mr. DeFazio [continuing]. The whole ball of wax.
    Ms. Pinkerton. So you have other ways of doing it. The PFC 
is not the sole source.
    Mr. DeFazio. But if there are cases where there isn't 
another way to do it and we need to discuss----
    Ms. Pinkerton. But there are----
    Mr. DeFazio. Now, Ms. Pinkerton, please, you know the 
procedures here. And I am being very nice to you. So you have 
got to not be quite so argumentative.
    We are talking about total costs, total burden, on the 
consumers. And if we add a dollar for baggage, that is a buck 
more. If we add a dollar for PFC, it is a buck more.
    I could argue that, if I added a dollar for PFC that got me 
out of some incredibly congested, problematic security area in 
some airport, my passenger experience is much more enhanced 
than paying an extra dollar--well, I don't pay it because of my 
frequent flyer status, and I never check bags except twice a 
year, maybe, but people who have to pay the extra dollar.
    So, you know, it is coming out of their pocket one way or 
another. The same elasticity is going to apply because it is 
the total cost.
    So, I guess what I am trying to get at here: Is there a way 
of just taking the existing PFC with restrictions and saying, 
``OK. Anybody can go up this much,'' or saying, ``Well, maybe 
we could add an increment'' or, ``Maybe we could index it for 
inflation'' and they could add at least that increment?
    Is there something you could agree to that might be 
beneficial to operations and passengers that might otherwise 
not happen without that flexibility or do you just think there 
is always going to be another way to pay for these things?
    Ms. Pinkerton. There has always been another way.
    Mr. DeFazio. OK. Forget that.
    Ms. Pinkerton. All projects are being funded.
    Mr. DeFazio. Mr. Hauptli, would you respond to that.
    Mr. Hauptli. Yes. Mr. DeFazio, we disagree on that.
    Mr. DeFazio. OK. Well, good. But could you expand briefly.
    Mr. Hauptli. You used the example of a $1 here or a $1 
there. Would that it would only be that much. In the case of a 
bag fee, the total experience, $25----
    Mr. DeFazio. No. I just meant increases. I was talking 
about increases.
    Mr. Hauptli. All right. So, no, I think we have--as Mr. 
Reis pointed out, there are limitations in our ability to do 
what we need to do. There is an infrastructure investment gap 
that exists today that is incontrovertible.
    And I think it is highly unlikely--as much as this 
committee would like to authorize funding levels at 
dramatically increased levels from where we are today, that 
seems very unlikely, given the budget environment we are in.
    So I believe and I think airports across the country 
believe that the best way of providing the necessary 
infrastructure investment is the self-help of allowing airports 
to impose a higher fee locally.
    Mr. DeFazio. Mr. Chair, if I could. I know I am over time.
    I just want to say--and, again, I used it briefly at the 
beginning. There is another issue which is an equity issue. It 
first came up where I live in Springfield, Oregon.
    Eugene, Oregon, was going to build a new airport and they 
were going to bond it and all the taxpayers in Eugene were 
going to pay for it. And I said, ``Well, I use the airport more 
than anybody in Eugene. That is not fair.'' That was part of 
the genesis.
    And the other was an interstate issue, which is Portland 
airport serves Vancouver, Washington, and those people don't 
pay any taxes in the State of Oregon and I felt it was fair to 
be able to put some of the costs on them.
    I think everyone agreed the program has worked. I think we 
disagree over whether there are other options and whether it is 
adequate for the future and whether there are ways we could 
massage it. And I would love to continue that discussion in a 
more productive way than we can here.
    Thank you, Mr. Chairman.
    Mr. Ribble. Thank you. Chairman Shuster.
    Mr. Shuster. Thank you, Mr. Ribble. And thank the panel for 
being here.
    Sorry, I have been in and out, so I didn't hear much of 
what you said; but certainly if I ask a question or repeat 
myself, I hope you will bear with me.
    I think this issue is obviously a tough issue. We have got, 
you know, airports got to keep doing things to make sure they 
are staying fresh and the customers are coming and are going to 
take care of them. You have got an airline industry that is 
just now starting to make profits for the first time in years; 
and when you look at the last 30 years, I think it is fair to 
say you haven't made any money and that is difficult.
    So when I started with my opening statement before I asked 
a question, doing something different at the FAA, trying to 
figure out how we can get an airline industry, and I think they 
have finally, someone argued they have downsized too far. I 
think they have right-sized; and I think we are going to see an 
industry that is profitable, and you know, when you look around 
at the transportation industry, what the railroads have done 
over the years, and it is different; but it is still, there is 
a profitable industry that is paying for its own 
infrastructure, not relying on the Federal Government. I don't 
know that that is ever going to be possible, but it is reducing 
relying on the Government for paying for its infrastructure 
which I think should be the goal.
    When we again talk about PFCs, Mr. Reis, if you were to 
increase your PFCs, what kind of projects are you going to be 
able to move forward with? I know you are doing some projects 
now. What will you be able to move forward with, what types of 
things?
    Mr. Reis. Well, we have a $2 billion and a $2.5 billion 
program. We anticipate having to borrow $1.5 billion to $2 
billion of that $2.5 billion. So we have got reconstruction of 
two 45-year-old concourses that have effectively not been 
touched in most of that period of time. We have a new 
international arrivals facility, reconstruction of one of our 
three runways that will be a $100 million project. You don't 
think about little things like vertical circulation.
    Mr. Shuster. What was that?
    Mr. Reis. Vertical circulation. It is a fancy word for 
elevators and escalators. We have about 60 escalators. Many of 
them are 50 years old. So as an airport expands, the airport 
was last completely redone in 1973, at which point there were 5 
million passengers and an anticipation of 25 million 
passengers. We are now at 35 million. So we have got everything 
from infrastructure no one will ever see, electrical systems, 
all the way through brand new international arrivals facility 
and sort of everything in between.
    Mr. Shuster. Let me ask you the converse of that. What 
aren't you doing because you don't have the funding?
    Mr. Reis. This is a plan, and the question is how do we 
fund it. Now, we are very lucky, unlike many of our colleagues, 
both large airports and especially small airports, in that our 
airline agreement, the contract we have with our airline 
partners, does not provide the airlines a veto over our 
decisions. Many of my colleagues do not have that luxury.
    So when you talk about the PFC as a funding mechanism, in 
many ways what we are really talking about is control. Will the 
local governing body, because they have adequate PFC resources, 
be able to make the decisions for what is good for their 
community and their airport, or will the airlines be able to 
veto the desires of the local community.
    The PFC, because it is locally imposed, locally decided 
upon, provides local governing bodies whether it be a city 
council or an authority board like ours, the ability to make 
those decisions. If it is, the PFC is inadequate, and the only 
option is to have the airlines pay for those costs, pay that 
debt service, then in many instances, the airlines have the 
ability to say, no, community, we don't agree with your 
priorities, you can't make that investment. That happened to us 
recently on a cargo project. The airlines voted it down. Now, 
luckily all we had to do is wait 6 months and do it; but in 
many communities they would not be able to do it because the 
airlines vetoed it.
    So in many ways a PFC increase, so that it stays up with 
inflation, is a way to let local communities make decisions 
about what is good for their airport as opposed to letting the 
airlines dictate it.
    Mr. Shuster. Mr. Hauptli, on that question, the broader 
airport association, what projects aren't getting done. It 
sounds like Sea-Tac is doing a lot. Can you talk about other 
places in the country that we are not seeing it happen?
    Mr. Hauptli. Sure. Just let me just circle back very 
quickly to a point that you just made a couple of moments ago 
about the reliance on Federal funding. What we are asking for 
is exactly that. We are asking to be less reliant on the 
Federal Government. We are asking for the self help to let us 
get out of the Federal Government controlling these decisions. 
That is the beauty of the passenger facility charge. In a 
constrained Federal budget environment that we are in today, 
this allows for the needed infrastructure investment without 
the reliance on Federal funding.
    On the issue that you raise, Mr. Chairman, an example would 
be in the city of Chicago, where up to a point the city of 
Chicago and the airlines have negotiated what they mutually 
agree is necessary to be built for that airport. However, there 
remains other parts of that modernization program that the 
airlines don't agree need to be funded and the city of Chicago 
has baked into their financing plans an increase in the 
passenger facility charge in order to complete that project.
    Again, a difference of opinion about what the need is, what 
the scope is, how far into the future you should look, a 
legitimate disagreement of opinion, but an example where the 
community is looking out further out into the future than the 
carriers that are currently operating at that facility are 
looking.
    Mr. Shuster. Right. What about places like Pittsburgh and 
Kansas City, and I guess Cleveland now has been what they call 
dehubbed?
    Mr. Hauptli. I don't have examples for you, from those, Mr. 
Chairman.
    Mr. Shuster. Ms. Pinkerton, it appears from the forecasting 
we are going to have lots more people, and we are also going to 
have a lot more people in this country. In the next 20 years we 
are going to have over close to 400 million people. If we 
continue to see that kind of additional funds building 
infrastructure, where do they come from? What are your thoughts 
on that?
    Ms. Pinkerton. So, first of all, I think what you have 
heard from me is violent agreement, that airlines and airports 
need to work together on needed infrastructure, and we have 
demonstrated that we are willing to do that and we will 
continue to do that. The disagreement comes in how we do that; 
and the case I am making is that there are record revenues in 
PFCs; there are AIP fundings; there is record airline rents, 
and there is record private funding. There is a $6 billion 
uncommitted balance in the aviation trust fund, something very 
different than what you are facing in the Highway Trust Fund.
    And so we are not arguing that things don't need to be 
built. They do, and we agree with that. We just don't think you 
need to tax passengers to build those projects. We think bond 
funding is available. All of the projects that Mr. Reis talked 
about, they are going forward. They are moving forward.
    Mr. Shuster. And when they are bond funded or financed, 
airlines are paying that in the rent factor?
    Ms. Pinkerton. Exactly. We have made a policy decision. We 
would rather pay for it in our rents and fees than seeing 
passengers taxed, especially when there is a $6 billion 
uncommitted balance in the trust fund.
    Mr. Shuster. Right. And then finally, Mr. Baker, I 
understand this is your first time before the committee. 
Welcome. I know you are ably staffed back there. Your team, you 
have got a good team that know a thing or two about this 
committee.
    Mr. Ribble asked a question, and you may have answered and 
I may have missed it, of the various different costs for the 
general aviation community. Really the cost I am looking for is 
what do you pay to land or take off, whatever they pay? I know 
it is different in other places, but can you give me a sense of 
what a general aviation operator is paying in taking off and 
landing fees.
    Mr. Baker. It is all over the map. This past weekend, I was 
in Ocean City, Maryland, and it was $40 to land my little 
airplane there, and another $40 to park it overnight for that 
facility, for one-time use. It is a great facility. It is well 
used. It is a great way to see the Jersey shore.
    I have travelled through your great State and used reliever 
airports around Pittsburgh a number of times; and certainly 
Appleton and other places are great airports you can use. It is 
up to the discretion of each individual airport. In some cases 
you really don't know until you get there how much they are 
going to charge you for their service fee. Some cases are 
waived, if you buy fuel. In other cases there is an overnight 
fee for parking your aircraft outside.
    For the most part, they are reasonable and you have the 
choice once you have gained that knowledge if you want to use 
that airport or a different airport that may have a lower cost. 
And we see the fuel tax as a primary way we pay our part of our 
deal.
    Mr. Shuster. What do they range? You said they are all over 
the map. What are they from $20 to, I mean, a place like 
Teterboro, would you pay a high fee to have to land there?
    Mr. Baker. Oh, yeah. As an example, if you go into Boston, 
you will pay $300 to $400 to land at Logan. If you go into 
Appleton, it is free at the moment. So it is all over the map.
    Mr. Shuster. OK. All right. Again, I appreciate you being 
here today. I appreciate all of you being here today, and 
hopefully you are all going to go to Tarkio, which is the 
center of the world for GA, in July. I think you are going to 
be there, Mr. Baker. I encourage everyone to check it out. I 
have to say that commercial for Mr. Graves. It is his air show, 
or not his air show, but he is very involved in it.
    Again, I appreciate all of you being here, and again I 
think we have had all of you, Mr. Reis and I know Mr. Hauptli; 
and, Sharon, somebody from your organization has been to one of 
our listening sessions and I don't know if we have had the GA. 
No, we are going to do the GA community listening session out 
in Tarkio.
    But it is important that we figure a way forward. I know 
these issues, funding is always a struggle, but making sure 
that we have an airline industry, an aviation industry, that is 
strong and viable because I think from all corners of the globe 
we are under attack, whether it is the mideastern air carriers 
or the manufacturers who are producing parts and aircraft for 
the GA community, if we don't have an FAA that functions more 
efficiently than it does today, we are going to slowly start to 
see our number one status in the world deteriorate; and that is 
something that I think all Americans should pay attention to 
and not let happen.
    So again, I appreciate you all being here today. I 
appreciate the exchange of information, ideas, and opinions, 
and we look forward to continuing working with you. Thank you.
    Mr. Meadows [presiding]. And the Chair thanks the chairman 
of the full committee for his insightful questions and really 
in illuminating that. The Chair would recognize itself for a 
couple of very brief questions.
    Mr. Reis, AIP funding has been talked about today. Are 
there different restrictions on that funding based on the size 
of the airport?
    Mr. Reis. Mr. Chairman, I am not sure there are 
differentiations between size, although I will not claim to be 
an expert on that field. For small airports, very small 
airports, GA airports get a certain dollar amount every year as 
an entitlement, unlike larger airports which get it as a 
percentage of the total amount available. There is a fixed 
amount, and they can use it with a great deal of discretion at 
the very small end.
    But once you get into the commercial service airport, 
certainly small, medium and large, I think we all have to live 
by the same rules. The key thing is really competition for the 
discretionary dollars. The FAA does a very good job of looking 
at the amount of money that is available on a discretionary 
basis and saying what is going to make the greatest 
contribution to the objectives that Congress might have put 
into statute or that the FAA has put into their own guidance; 
and the projects, no matter which airport it is, that are going 
to make the greatest contribution to the benefit of the overall 
system are going to end up competing better than another 
project that might be technically qualified but may not make as 
great a contribution to the system.
    Mr. Meadows. But wouldn't that inherently disadvantage 
smaller, more rural airports, because if you do that then based 
on traffic flow and everything else, all the Federal dollars 
will go to the major cities, and it will continue to do that. 
Is there not a better way to give greater flexibility to 
smaller rural, and I just happen to represent a small rural 
airport is why I would ask?
    Mr. Reis. Right. Well, in round numbers, and again I am not 
a real expert on this really complex system; but of the $3.3 
billion program, about $3.1 billion is actually made available 
to airports or some other stuff that is done off the top and of 
the $3.1 billion or so, somewhere in the $3 to $700 million 
range is discretionary money. The rest of it is allocated on an 
apportionment or an entitlement basis, and so an airport is 
going to get a certain amount of money based on their size. But 
you are absolutely right.
    In terms of the discretionary amount, whatever that might 
be in any given year, a large airport has a much better chance 
of making the case that its project is making a contribution to 
the overall system for that discretionary amount than a smaller 
airport would.
    That is one of the reasons why we as large airports who can 
take the greatest advantage of a PFC increase because we have a 
lot of enplanements and thus more PFCs, recognize that we have 
to see in the future that the AIP really needs to be preserved 
for the smaller airports and that if a PFC is adequately sized, 
I think you will find that most if not all very large airports 
are going to recognize that a decrease in AIP for large 
airports is part of the benefit to the overall system.
    Mr. Meadows. I will go ahead and yield to Mr. Larsen so he 
can do a followup question.
    Mr. Larsen. Different issue actually. I am trying to 
understand, Ms. Pinkerton, your comments about the unobligated 
balance in the trust fund of $6 billion or so.
    Much like other unobligated balances in accounts in the 
Federal Government, administrations current and past use those 
to mask the size of the actual deficit not allowing the full 
spend-down of those dollars. For instance, we had a problem 
with the Harbor Maintenance Trust Fund recently, and we fixed 
that through the WRDA bill, Water Resources Development Act 
that says we are going to start spending down unobligated 
balances because there are limits on doing that, limited by 
what we have actually authorized.
    So I am curious about this unobligated balance in the trust 
fund, is it not limited by what we have actually authorized to 
be spent, and therefore it is not really yet accessible to be 
spent down?
    Ms. Pinkerton. No. I believe the reason we have seen an 
increase in the balance is in the last reauthorization bill, 
you did change the way the money is spent out; so I suppose in 
a way the answer is yes.
    The money is spent based partially on a forecast of what is 
going to come in versus what does come in. So I think what has 
happened is we have had, again, record amounts of money coming 
in that weren't anticipated, and thus the balance is built up.
    Mr. Larsen. And therefore not able to be spent out as a 
result?
    Ms. Pinkerton. Right.
    Mr. Larsen. So we would have to?
    Ms. Pinkerton. Change that.
    Mr. Larsen. Change that in order for those dollars to be 
accessible?
    Ms. Pinkerton. The formula, correct.
    Mr. Larsen. It is not a matter of saying it is sitting 
there; why aren't airports using it? The answer is they can't?
    Ms. Pinkerton. Correct. It is a policy decision written in 
the bill.
    Mr. Reis. I just want to make sure that we recognize that 
this is the Airport and Airway Trust Fund. It is not all 
designed for AIP. The Congress is facing a very large bill for 
NextGen, and the F and E, the facilities and equipment budget, 
comes out of that as well. So I would not imagine that it is 
all going to be available to airports.
    Mr. Larsen. Right. Right. Sure. I got it. Thank you.
    Mr. Meadows. Thank you. One followup question, Mr. Reis, 
when you talked in April at a hearing, you talked about small 
and rural communities and the cost per enplanement and talked 
about the relationship, I guess, between the cost per 
enplanement and air service and different financing options.
    How would those financing options actually lower an 
airport's cost of enplanement? And that is a followup to your 
April testimony.
    Mr. Reis. Right. Well, for small airports, they have many 
fewer options to finance than large airports do.
    Mr. Meadows. So it really wouldn't lower the cost?
    Mr. Reis. I don't know that an increased PFC for an airport 
that does not have very many enplanements is not going to 
generate a lot of money.
    Mr. Meadows. So the financing option is for the bigger 
airports.
    Mr. Reis. I think that is correct. A smaller airport has 
got very few options.
    Mr. Meadows. If there are no further questions, I want to 
thank the witnesses for your testimony, the Members obviously 
for their participation; and this subcommittee stands 
adjourned.
    [Whereupon, at 12:40 p.m., the subcommittee was adjourned.]
    
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