[Federal Register Volume 59, Number 209 (Monday, October 31, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-26925]


[[Page Unknown]]

[Federal Register: October 31, 1994]


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DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration
[Docket No. 27955]

 

Policy for Letter of Intent Approvals Under the Airport 
Improvement Program

AGENCY: Federal Aviation Administration (FAA), DOT.

ACTION: Notice of policy; request for comments.

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SUMMARY: The FAA is clarifying its policies on reviewing and analyzing 
requests for Letters of Intent (LOIs) under the Airport Improvement 
Program (AIP) or successor programs. The FAA will consider three 
factors in reviewing requests for LOIs: the project's effect on overall 
national air transportation system capacity; project benefit and cost; 
and the airport sponsor's financial commitment, including project 
timing. The FAA also solicits comments on the new policy. Following 
review of the comments, the FAA may revise this policy.

DATES: The comment closing date is November 30, 1994.

ADDRESSES: Comments may be mailed or delivered in duplicate to: Federal 
Aviation Administration, Office of Airport Planning and Programming, 
Attn: Mr. Stan Lou (APP-520), room 614, 800 Independence Avenue, SW, 
Washington, DC 20591. Comments must be marked: Policy for Letter of 
Intent Approvals Under Airport Improvement Program.

FOR FURTHER INFORMATION: Contact Stan Lou, FAA, Programming Branch, 
APP-520, room 614, 800 Independence Avenue, SW, Washington, DC 20591, 
telephone (202) 267-8809.

SUPPLEMENTARY INFORMATION:

Request for Comments

    Comments are invited on this notice of policy and all 
communications received on or before the closing date for comments will 
be considered by the FAA. FAA may subsequently issue a change to this 
policy after considering the comments.

Background

    In 1987, legislation was enacted authorizing the issuance of LOI's. 
The Codification of Certain U.S. Transportation Laws as Title 49, 
United States Code, Public Law No. 103-272, (July 5, 1994), section 
47110(e)(2)(C) states:
    The provisions of this subsection applies to a project the 
Secretary decides will enhance system-wide airport capacity 
significantly and meets the criteria of section 47115(d) of this title.
    Section 47115(d) states:
    In selecting a project for a grant to preserve and enhance capacity 
as described in subsection (c)(1) of this section, the Secretary shall 
consider--(1) the effect the project will have on the overall national 
air transportation system capacity; (2) the project benefit and cost; 
and (3) the financial commitment from non-United States Government 
sources to preserve or enhance airport capacity.

General

    The FAA is authorized to issue an LOI for certain airport 
development projects when current obligating authority is not timely or 
adequate to meet a sponsor's desired timing for a project. Under this 
provision, a sponsor may notify the FAA of an intention to carry out a 
project without Federal funds and request that the FAA issue an LOI. 
The FAA evaluates the proposal and, if approved, issues a letter 
stating that reimbursement will be made according to a given schedule, 
as funds become available. A sponsor who has received an LOI, 
therefore, may proceed with a project without waiting for an AIP grant, 
is assured that all allowable costs related to the approved project 
remain eligible for reimbursement, and may receive more favorable 
financing to pay related costs on the basis of announced Federal 
support for the project.

Discussion

    Since FY 1987, the FAA has issued 48 LOI's (43 at primary airports 
and 5 at reliever airports). The total payments contemplated in these 
LOI's total nearly $2 billion ($1.5 billion of discretionary and $0.5 
billion of entitlements). Of this, $0.9 billion has been granted to 
airports. The balance of $1.1 billion would be granted to airports 
through the year 2005. These LOIs include $0.8 billion discretionary 
and $0.3 billion entitlements. The following chart summarizes this 
information.

                                              LOI Payment Schedule                                              
----------------------------------------------------------------------------------------------------------------
                                                    Entitlement          Discretionary             Total        
----------------------------------------------------------------------------------------------------------------
               (2) FY 1988-1994                                                                                 
Primary.......................................          $244,630,376          $549,608,584          $794,238,960
Reliever......................................               173,053            88,540,096           88,713,149 
                                               -----------------------------------------------------------------
      Subtotal................................           244,803,429           638,148,680           882,952,109
               (2) FY 1994-2005                                                                                 
Primary.......................................           277,208,862           719,185,089           996,393,951
Reliever......................................                     0           112,000,000          112,000,000 
                                               -----------------------------------------------------------------
      Subtotal................................           277,208,862           831,185,089        1,108,393,951 
                                               =================================================================
        Total.................................           522,012,291         1,469,333,769        1,991,346,060 
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    At the beginning of each fiscal year, the FAA, in its 
administration of the AIP, sets aside the amounts of discretionary 
funds to ``cover'' the LOI payment schedules. For the primary airports, 
the main sources of the discretionary funds are the ``capacity, safety, 
security, noise (CSSN)'' set aside and the remaining discretionary. For 
reliever airports, the source is the 5 percent ``reliever'' set aside.
    In the first 5 years of administering the LOI component of the AIP, 
the overall level of the AIP increased from $1.2687 billion in FY 1988 
to $1.9 billion in FY 1992, and then decreased to $1.8 billion in FY 
1993, $1.69 billion in FY 1994, and $1.45 billion in FY 1995. The 
amount of CSSN and remaining discretionary likewise increased from 
$205.1 million to $524.8 million in FY 1992, and decreased to $299.9 
million in FY 1993 but has now stabilized at $325 million annually in 
current legislation. During these years, the FAA initially established 
an administrative policy that no more than 50 percent of the available 
CSSN discretionary would be committed to LOI's. In FY 1992, this policy 
was amended to include both CSSN and remaining discretionary. The FAA 
worked closely with airport sponsors to develop work programs and LOI 
payout schedules which maintained the 50 percent rule. We expect to 
maintain this policy. Reliever LOI's were not routinely used as a 
funding vehicle since most reliever sponsors cannot ``up front'' the 
construction costs.
    The convergence of growing demand and reduced availability of AIP 
discretionary funds dictates a new strategy for approval of LOI's. For 
the foreseeable future, the overall level of the AIP may not increase. 
This is primarily the result of budgetary pressures. Secondly, the 
amount of available discretionary funds has diminished from the level 
available in FY 1992 to the current level of no less than $325 million 
annually. Against this discretionary level, numerous airport sponsors 
are requesting LOI's for many important projects. The FAA, therefore, 
has developed this policy to consider competing LOI requests.
    Policy--The FAA intends to consider requests for Letters of Intent 
(LOI) under the Airport Improvement Program (AIP) (or successor 
programs) at primary or reliever airports only for airside development 
projects with significant capacity benefits. This focus is intended to 
maximize the systemwide impact of capacity projects, especially given 
the limited amounts of funds available for LOI projects. The FAA will 
use this policy in considering all future LOI requests.
    The FAA's decision to approve an LOI will be made based primarily 
on a benefit-cost analysis. This analysis will consider local and 
systemwide benefits in terms of annual aircraft delay savings, measured 
as the avoided costs of operating delayed aircraft and the value of 
passenger time associated with avoided delays. In addition, the net 
value to airlines, the airport, and the public from additional air 
transportation service will be considered. Project costs will be 
apportioned among Federal AIP discretionary funds, Federal AIP 
entitlement funds, and nonfederal funds. Financially sound projects 
will be selected for LOI approval in a manner that leverages Federal 
AIP discretionary funds to the maximum extent feasible, consistent with 
rational investment decisionmaking.
    The best candidates for approval will be those projects for a new 
airport, new runway, or major runway extension at cities or 
metropolitan areas where the primary airport exceeds or is expected to 
exceed 20,000 hours of annual air carrier delay. Apron development in 
support of terminal work is considered airside development. Federal 
environmental findings must be complete and the project work must be 
imminent.
    Starting in fiscal year (FY) 1995, applications for LOI's are to be 
submitted to the local FAA office no later than March 1 of the current 
FY for FAA decisionmaking during that FY. Applications received after 
March 1 may not be decided upon until the following FY.
    This policy does not apply to outstanding LOI's already issued to 
airport sponsors. The FAA will apply this policy to all other LOI 
requests.

FAA Review of LOI Requests

    The FAA will consider each proposed project in accordance with the 
following selection criteria. Each of the following three items will be 
reviewed for an LOI request.

1. Project Effect on Overall National Air Transportation System 
Capacity

    The FAA will analyze the project(s) effect on overall national air 
transportation system capacity in accordance with agency methodology 
and modeling capabilities. To do this, FAA will analyze the airport for 
which the LOI is requested and estimate the current hours of annual 
flight delay. The FAA will then determine the systemwide impact of the 
project(s) in terms of reduced annual aircraft and passenger delays at 
current and future airport activity levels. The FAA may request 
information from sources at the airport or may visit the site to 
collect data needed to model the proposed airport improvement. The FAA 
will also review any capacity analysis conducted by the airport and 
submitted with the application.
    The data requirements will be airport/terminal airspace specific 
and will be collected by the FAA. The data required will include, but 
are not limited to: The approved airport layout plan; type of 
operations; fleet mix; peak hour airfield mix by class; runway 
occupancy times; taxiway exit percentages; noise, obstruction, terrain, 
aircraft departure, and aircraft arrival constraints; air traffic 
arrival and departure streams; minimum vectoring altitudes; aircraft 
separation by aircraft type; length of and approach speeds on common 
approach by aircraft type and weather; converging and/or parallel 
runway dependencies; aircraft arrival and departure dependencies; and 
the different runway use configurations in the various wind and weather 
conditions. The data available or to be collected are very similar to 
those data assembled for FAA Airport Capacity Task Force and Capacity 
Design Teams studies.
    Many of the proposed capacity improvements have already been 
modeled and calibrated during FAA Airport Capacity Design Team studies 
and would only require updating. The updating would include any new 
national air traffic approach procedures, separation standards, and 
capacity initiatives implemented by the specific airport traffic 
control tower or airport authority.

2. Project Benefit and Cost

    Analysis will involve a detailed review of future benefits and 
costs for each year of the project's expected life, discounted to 
present value at an appropriate discount rate. The FAA will measure 
benefits in terms of annual cost savings attributable to reduced 
delays, to be measured as the avoided costs of operating delayed 
aircraft (e.g., fuel and oil, crew, and maintenance savings) and the 
monetary value of saved passenger time. In addition, the net value to 
airlines, the airport, and the public from additional air 
transportation service made possible by the capacity project will be 
considered. Costs will be estimated for planning, construction, 
operation, and maintenance of the project, and will be apportioned 
according to origin of funding--Federal AIP discretionary funds, 
Federal AIP entitlement funds, and nonfederal funds.
    To be eligible for further consideration, the proposed project must 
have present value benefits that exceed present value costs and must 
have appropriate sponsor financial commitment (see section 3 below). 
The FAA will select among eligible projects with the object that 
Federal AIP discretionary funds will attract funding from other sources 
to the maximum extent feasible, consistent with rational investment 
decisionmaking. To accomplish this objective, the FAA will consider 
various measures of project financial viability (e.g., net present 
values, benefit-cost ratios, and rates of return) relative to the 
amount of Federal AIP discretionary funds requested. Eligible projects 
to be funded entirely with Federal AIP entitlement funds will be 
approved for LOI's if FAA concludes that entitlement funds will be 
available.

3. Financial Commitment, Including Project Timing

    The FAA will determine the airport sponsor's financial commitment 
in terms of the airport capital improvement plan and associated 
financial plan over the lesser of the life of the LOI of 5 years. The 
plan should include by FY a list of the projects to be implemented, 
both LOI and non-LOI; and, for each project, the total project cost 
with a cost breakdown by source of funds (AIP entitlement, AIP 
discretionary, passenger facility charges (PFC), sponsor, State, and 
other, including available cash reserve accounts). The amount of funds 
to be obtained through selling bonds should also be indicated along 
with the bond rating, if available, and status of issuance.
    In making its determination, the FAA will consider the sponsor's 
commitment of entitlement funds to the proposed project or to higher 
priority projects, whether PFC's are being applied, the contribution of 
nonfederal funding sources, diversion of airport revenue off the 
airport, and whether the sponsor plans to proceed with the project in 
accordance with all applicable statutory and administrative 
requirements, with the LOI payments to be used as reimbursements for 
advance expenditures.

    Issued in Washington, D.C. on October 26, 1994.
Cynthia Rich,
Assistant Administrator for Airports.
[FR Doc. 94-26925 Filed 10-26-94; 2:23 pm]
BILLING CODE 4910-13-M