[Federal Register Volume 64, Number 110 (Wednesday, June 9, 1999)]
[Notices]
[Pages 31031-31032]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-14481]


-----------------------------------------------------------------------

DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration


Factors Affecting Award of Airport Improvement Program (AIP) 
Discretionary Funding

AGENCY: Federal Aviation Administration, DOT.

ACTION: Notice.

-----------------------------------------------------------------------

SUMMARY: The Federal Aviation Administration (FAA) reiterates four 
factors that may militate against a decision by the FAA to award AIP 
discretionary funding to an airport sponsor. These factors are: revenue 
diversion; delinquent submissions of financial reports; unsatisfactory 
progress on existing grant agreements; and use of AIP entitlements 
funds on low priority development as calculated under the FAA's 
National Priority System (NPS) equation.

FOR FURTHER INFORMATION CONTACT: Mr. Barry L. Molar, Manager, Airports 
Financial Assistance Division, APP-500, on (202) 267-3831.

SUPPLEMENTARY INFORMATION: The FAA manages the AIP in accordance with 
statutory direction and agency policies and criteria. Decisions to 
award discretionary grants are made on the basis of a number of 
factors, including project evaluation under the NPS. The Congress has 
directed that FAA take certain additional factors into consideration. 
The FAA hereby provides notice and explanation of those factors, and 
the manner in which the FAA will consider them in making decisions on 
discretionary grants.

1. Improper Diversion of Airport Revenue

    Airport sponsors receiving federal grants under the Airport 
Improvement Program (AIP) are subject to a number of statutory 
conditions, one of which restricts the use of airport revenue. The FAA 
published a notice of final policy and procedures concerning the use of 
airport revenues (64 FR 7696). The Notice defines proper and improper 
uses of airport revenue and describes actions the FAA may take to 
address improper revenue use.
    It is the intent of the FAA to generally withhold AIP discretionary 
funding to those airports requesting such funding that are being 
investigated by the FAA for misuse of airport generated revenue. 
Airports qualifying under Title 49 U.S.C. 47107(b)(2) are exempted from 
this policy. This provision recognizes the rights of ``grandfathered'' 
airport sponsors to use airport revenues for other purposes. However, 
as discussed below, payments permitted under the ``grandfather'' 
provision may be considered a militating factor against the award of 
discretionary grants in certain circumstances.

General Rule

    Title 49 U.S.C., Sections 47107(b) and 47133; generally requires 
airport revenues to be used for the capital or operating costs of the 
airport, the local airport system, or other facilities owned or 
operated by the airport sponsor and directly and substantially related 
to the actual air transportation of persons or property. If the FAA 
finds that an airport is not complying with this statute, after 
providing notice and an opportunity for hearing, and the sponsor does 
not take satisfactory corrective action, various enforcement actions 
are mandated or authorized. The enforcement actions affecting AIP 
funding that the FAA is authorized or required to take include any of 
the following, or combination thereof: withholding of future AIP 
entitlement and discretionary grants (49 U.S.C. 47106(d), 47111(e)); 
withholding approval of the modification of existing grant agreements 
that would increase the amount of AIP funds available (section 
47111(e)); and withholding payments under existing grants (section 
47111(d)).

Grandfather Provision

    Under the ``grandfather provision'' of the revenue use requirement, 
sections 47107(b) and 47133(b), an airport operator may use airport 
revenues for local purposes other than those proscribed in sections 
47107 and 47133 if a provision of law controlling the airport 
operator's financing enacted on or before September 2, 1982 or a 
covenant or assurance in an airport operator's debt obligation issued 
on or before September 2, 1982 provides for the use of airport revenues 
from any facility of the airport operator to support general debt 
obligations or other facilities of the airport operator. The statutory 
revenue-use provisions also permit local taxes on aviation fuel in 
effect on December 30, 1997 to be used for any local purpose.
    Thus, the use of airport revenue for local purposes under these 
exceptions does not preclude the award of AIP grants to an airport 
operator. However, under 49 U.S.C. Sec. 47115(f), the FAA must, in 
certain circumstances, consider as a factor militating against the 
distribution of discretionary AIP funding, the use of airport revenue 
for local purposes under the ``grandfather provision.'' This militating 
factor applies only if the airport revenue so used in the airport's 
fiscal year preceding the date of the application for discretionary 
funds exceeds the amount of revenues used in the airport's first fiscal 
year ending after August 23, 1994, and adjusted for changes in the 
Consumer Price Index. In addition, the airport's failure to provide 
information needed by the FAA to determine whether Section 47115(f) 
applied to a specific grant application would prevent the FAA from 
making an evaluation required by Section 47115(f), and thus, would 
prevent the FAA from considering an application for discretionary 
funds.

2. Annual Financial Reports

    Section 111(c) of the Federal Aviation Administration Authorization 
Act of 1994 (the 1994 Act) requires the Secretary of Transportation to 
submit to the Congress, and to make available to the public, in annual 
report listing in detail certain financial information requiring 
individual airport revenues and expenditures. The data is derived from 
reports by airport owners or operators, also required by Section 
111(a)(19) of the 1994 Act. Under the authority of Assurance 26 of the 
Airport Sponsor Assurances, airport sponsors are required to submit 
annual reports. The FAA's September 10, 1998, Advisory Circular (AC) 
titled Guide for Airport Financial Reports Filed by Airport Sponsors 
specifies the report format and due dates.

[[Page 31032]]

    Failure of an airport sponsor to file airport financial reports by 
the due date will cause FAA to withhold award of AIP discretionary 
funds. The sponsor will not be considered for discretionary funds until 
it provides acceptable corrective action and is determined by the FAA 
to be in compliance with the reporting requirements. If the FAA makes a 
determination that the sponsor is in noncompliance with Assurance 26, 
it may withhold all sources of AIP funding (both discretionary and 
entitlement). The FAA will suspend processing of discretionary grants 
(grants for funds not apportioned under Section 47111(e)) immediately 
upon determining that a sponsor's airport financial reports are 
overdue.

3. Progress on Existing Grant Agreements

    As a general policy, the FAA encourages sponsors to take 
construction bids prior to submitting an application of AIP grants. 
Bid-based grants more accurately reflect actual project costs, allow 
for more efficient management of AIP obligations, and help to ensure 
sponsors proceed timely with projects. When AIP funds are obligated by 
a grant, airport sponsors are encouraged, to the extent practicable, to 
make timely AIP draw downs as they incur costs leading to completion of 
their projects. FAA financially closes AIP projects as soon as possible 
following physical completion of the project. Close adherence to this 
policy helps to ensure that AIP funds do not remain idle after they are 
obligated in a grant, that a sponsor complete projects in a timely 
manner, and that the need to amend grants to accommodate higher costs 
is minimized. This policy has been developed and applied by the FAA, 
prior to the advent of the AIP, to foster effective financial 
management of federal grant funds.
    The airport sponsor's management of past AIP grants can influence 
FAA's consideration of AIP discretionary funds for proposed projects. 
Efficient and expeditious implementation by airport sponsors of past 
grant is encouraged. Factors which may militate against the 
distribution of discretionary funds include: failure to financially 
close a physically completed project in a timely manner; inability to 
commence or complete work under an approved grant in a timely manner; 
and, having an excessive number of open, uncompleted grants.
    The FAA understands that there may be compelling that justify 
relaxation of the general policy in light of specific local factors. 
FAA will take these factors into consideration when evaluating requests 
that contemplate the use of discretionary funds, and in accordance with 
FAA policy, thoroughly document exceptions to this general rule.

4. Sponsor Use of Entitlement Funds

    The FAA encourages airport sponsors to use entitlement funds on the 
``highest priority'' work at the airport as calculated under the FAA's 
National Priority System (NPS) equation. A detailed discussion of the 
NPS was published in the Federal Register Notice dated August 25, 1997, 
entitled Revisions to the Airport Capital Improvement Plan (ACIP) 
National Priority System. For purposes of determining whether sponsor 
entitlements are being used on high priority projects, the FAA will 
calculate the priorities of sponsor work items from the NPS equation. 
This policy helps ensure that AIP funds in the aggregate are used for 
projects that contribute most to the safety, security, capacity, and 
efficiency of the Nation's system of airports. Conversely, if sponsors 
use entitlement funds for lower priority projects and FAA agrees to use 
discretionary funds for the highest priority projects, the aggregate 
result of AIP investments is likely to provide less benefits to the 
national system than under FAA's policy.
    Therefore, if the FAA determines that an airport sponsor is using 
its entitlement funds on low priority rated projects while requesting 
discretionary funds for higher priority rated work, the FAA may 
withhold discretionary funds requested by the sponsor.
    As with a sponsor's rate of progress on existing grants, the FAA 
understands that there may be legitimate circumstances for a sponsor to 
use its entitlement funds for lower priority work. In addition, the FAA 
is fully cognizant that the NPS equation cannot always demonstrate the 
total benefit of a project to the airport or the national system. 
Consequently, the FAA will thoroughly evaluate a sponsor's 
justification prior to denying a request for discretionary funding on 
the basis of the sponsor's use of entitlements for lower priority 
projects. In accordance with FAA policy, such exceptions must be 
documented by the airport sponsor and submitted to FAA. Issued in 
Washington, DC on May 25, 1999.
Paul L. Galis,
Director, Office of Airport Planning and Programming.
[FR Doc. 99-14481 Filed 6-8-99; 8:45 am]
BILLING CODE 4910-13-M