Airport Finance: Using Airport Grant Funds for Security Projects 
Has Affected Some Development Projects (15-OCT-02, GAO-03-27).	 
                                                                 
The events of September 11, 2001 created several new challenges  
for the aviation industry in ensuring the safety and security of 
the national airport system. Chief among them is deciding to what
extent Airport Improvement Program (AIP) grant funds should be	 
used to finance the new security requirements at the nation's	 
airports. Although many in the aviation industry believe that	 
funding security projects has become even more important in the  
aftermath of September 11, they also recognize the need to	 
continue funding other airport development projects, such as	 
those designed to enhance capacity in the national airport	 
system. During fiscal year 2002, the Federal Aviation Association
(FAA) awarded a total of $561 million, 17 percent of the $3.3	 
billion available for grants, in AIP grant funds to airports for 
security projects related to the events of September 11, 2001.	 
This amount is the largest amount awarded to airports for	 
security projects in a single year since the program began in	 
1982. Based on data provided by FAA, all of the security projects
funded with AIP grants since the events of September 11, 2001,	 
met the legislative and program eligibility requirements. The	 
projects, which range from access control systems to terminal	 
modifications, qualified for AIP funding either under eligibility
requirements in effect before September 11, 2001, or under	 
subsequent statutory and administrative changes. Although FAA	 
Airport Planning and Programming officials stated that they were 
able to comply with statutory requirements, set-asides, and other
program priorities, the $504 million increase in AIP grand funds 
for new security projects in fiscal year 2002 has affected the	 
amount of funds available for some airport development projects  
in comparison with the distribution of AIP grand funds awarded in
fiscal year 2001. FAA was able to fully fund these projects, in  
part, because of a record level of carryover apportionments,	 
which totaled $355 million, and the $84 million in grant funds	 
that were recovered from prior-year projects. However, there were
reductions in AIP funding awarded to nonsecurity projects in	 
fiscal year 2002, as compared with fiscal year 2001.		 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-03-27						        
    ACCNO:   A05285						        
  TITLE:     Airport Finance: Using Airport Grant Funds for Security  
Projects Has Affected Some Development Projects 		 
     DATE:   10/15/2002 
  SUBJECT:   Airport security					 
	     Funds management					 
	     Grants						 
	     Program evaluation 				 
	     National preparedness				 
	     Transportation industry				 
	     Transportation safety				 
	     FAA Airport Improvement Program			 

******************************************************************
** This file contains an ASCII representation of the text of a  **
** GAO Product.                                                 **
**                                                              **
** No attempt has been made to display graphic images, although **
** figure captions are reproduced.  Tables are included, but    **
** may not resemble those in the printed version.               **
**                                                              **
** Please see the PDF (Portable Document Format) file, when     **
** available, for a complete electronic file of the printed     **
** document's contents.                                         **
**                                                              **
******************************************************************
GAO-03-27

Report to the Committee on Transportation and Infrastructure, House of
Representatives

United States General Accounting Office

GAO

October 2002 AIRPORT FINANCE Using Airport Grant Funds for Security
Projects Has Affected Some Development Projects

GAO- 03- 27

Page i GAO- 03- 27 AIP Grant Funds Letter 1

Results in Brief 1 Background 4 FAA Is Awarding More AIP Grant Funds to
Airports for Security

Projects in Fiscal Year 2002 Than in Each Previous Year of the Program*s
History 7 AIP Grants Awarded to Airports for Security Projects since

September 11, 2001, Met Legislative and Program Eligibility Requirements 9
Increase in AIP Funding for Security Projects Has Affected

Funding for Some Airport Development Projects in Fiscal Year 2002 and
Could Have a Greater Effect in Fiscal Year 2003 11 Scope and Methodology
15 Agency Comments 16

Appendix I List of Runway Projects at Major Airports 17

Appendix II Airports Eligible to Receive AIP Funding 18

Glossary 19

Tables

Table 1: Changes in AIP Eligibility for Airport Development Projects,
Since September 11, 2001 6 Table 2: Distribution of AIP Grant Funds
Awarded for Security

Projects by Airport Type, Fiscal Year 2002 9 Table 3: Distribution of AIP
Grant Funds Awarded for Security

Projects by Project Type, Fiscal Year 2002 9 Table 4: Distribution of AIP
Grant Funds by Development

Category, Fiscal Years 2001 and 2002 12 Table 5: Distribution of AIP Grant
Funds by Airport Type, Fiscal

Years 2001 and 2002 13 Contents

Page ii GAO- 03- 27 AIP Grant Funds Figure

Figure 1: AIP Grant Funds Awarded for Security Projects, Fiscal Years 1982
through 2002 8

Abbreviations

AIP Airport Improvement Program ATSA Aviation and Transportation Security
Act DOT Department of Transportation FAA Federal Aviation Administration
LOI letter of intent NPIAS National Plan of Integrated Airport Systems TSA
Transportation Security Administration

Page 1 GAO- 03- 27 AIP Grant Funds

October 15, 2002 The Honorable Don Young, Chairman The Honorable James L.
Oberstar, Ranking Democratic Member Committee on Transportation and
Infrastructure House of Representatives

The events of September 11, 2001, created several new challenges for the
aviation industry in ensuring the safety and security of our national
airport system. Chief among them is deciding to what extent Airport
Improvement Program (AIP) grant funds should be used to finance the new
security requirements at the nation*s airports. While many in the aviation
industry believe that funding security projects has become even more
important in the aftermath of September 11, they also recognize the need
to continue funding other airport development projects, such as those
designed to enhance capacity in the national airport system.

Recognizing that a clear understanding of how AIP grant funds were awarded
before and after September 11 is an important step in determining the
future funding levels of AIP, as agreed with your office, we are
addressing the following questions:

 How does the amount of AIP funding awarded to airports for security
projects after the events of September 11, 2001, compare with the funds
awarded for security projects before then?

 To what extent did the airport security projects that received AIP
funding after the events of September 11, 2001, meet legislative and
program eligibility requirements?

 How has the use of AIP funding for airport security projects after the
events of September 11, 2001, affected AIP funding for other airport
development projects?

During fiscal year 2002, the Federal Aviation Administration (FAA) awarded
a total $561 million in AIP grant funds to airports for security projects
related to the events of September 11, 2001. 1 This $561 million

1 In addition, in fiscal year 2001, FAA awarded $13 million for security
projects related to the events of September 11, 2001.

United States General Accounting Office Washington, DC 20548

Results in Brief

Page 2 GAO- 03- 27 AIP Grant Funds

represents approximately 17 percent of the $3.3 billion available for AIP
grants in fiscal year 2002 and is the largest amount awarded to airports
for security projects in a single year since the program began in 1982. In
contrast, FAA awarded an average of less than 2 percent of the program*s
total funding to security projects for fiscal years 1982 through 2001.
During this period, AIP grant funds awarded to airports for security
projects ranged from $2 million in fiscal year 1982 to $122 million in
fiscal year 1991, when airports implemented new security requirements
governing access controls, according to FAA Airport Planning and
Programming officials. 2 Additionally, the $561 million FAA awarded to
airports for security projects in fiscal year 2002 represents more than an
800 percent increase over the $57 million for security projects awarded in
fiscal year 2001.

Based on data provided by FAA, all of the security projects funded with
AIP grants since the events of September 11, 2001, met the legislative and
program eligibility requirements. The projects, which range from access
control systems to terminal modifications, qualified for AIP funding
either under eligibility requirements in effect before September 11, 2001,
or under subsequent statutory and administrative changes. The Aviation and
Transportation Security Act (ATSA), passed in November 2001, amended
existing legislation governing AIP eligibility to permit funding for
fiscal year 2002 of any security- related activity required by law or the
Secretary of Transportation after September 11, 2001, and before October
1, 2002. This legislation also permits FAA to use AIP funds for replacing
airport baggage systems and the reconfiguration of terminal baggage areas
to accommodate explosives detection systems. In addition to these
legislative changes, FAA issued new program guidance that clarified
project eligibility requirements as defined in 49 U. S. C. Section 47102(
3) to include, among other items, surveillance equipment, blast proofing
of terminals, and explosives detection canines for use in terminals.

Although FAA Airport Planning and Programming officials stated that they
were able to comply with statutory requirements, set- asides, and other
program priorities, the $504 million increase in AIP grant funds for new
security projects in fiscal year 2002 has affected the amount of funds
available for some airport development projects in comparison with the
distribution of AIP grant funds awarded in fiscal year 2001. According to
these officials, they fully funded projects related to

2 The dollar amounts of AIP grant funds awarded in fiscal years 1982
through 2001 were converted to 2002 constant dollars. AIP funds awarded
for security projects in 1991 totaled $99 million in nominal dollars.

Page 3 GAO- 03- 27 AIP Grant Funds

 safety and security;

 noise mitigation and reduction;

 congressional earmarks; and

 all phased projects that had been previously funded under AIP. FAA was
able to fully fund these projects, in part, because of a record level of
carryover apportionments, 3 which totaled $355 million, and the $84
million in grant funds that were recovered from prior- year projects.

However, there were reductions in AIP funding awarded to nonsecurity
projects in fiscal year 2002, as compared with fiscal year 2001. For
example, there was an almost $156 million decrease in standards projects
and a $148 million decrease in reconstruction projects. Similar decreases
also occurred to the distribution of AIP grant funds by airport type.
Although large and small hub airports received increases in their AIP
funds, nonhub and reliever airports received the greatest reduction in
their funding in fiscal year 2002, as compared with fiscal year 2001. FAA
also deferred three letter- of- intent (LOI) payments under consideration
prior to September 11, 2001, that totaled $28 million, until fiscal year
2003 or later. The following three airports did not have discretionary
funds included in their scheduled LOI payments for fiscal year 2002:

 Hartsfield International Airport in Atlanta, Georgia, which is the
busiest airport in the country with almost 40 million enplanements per
year and was one of the most delayed airports in 2000 and 2001, had $10
million for a runway extension deferred.

 Cincinnati/ Northern Kentucky Airport in Covington, Kentucky, another
large airport with 11 million enplanements per year, had $10 million for a
new runway deferred.

 Indianapolis Airport in Indianapolis, Indiana, a medium- sized airport
with almost 4 million enplanements per year, had $7.5 million for a new
apron and taxiway deferred.

Airports Council International also reported that airports have delayed
almost $3 billion in airport capital development because of new security
requirements, most of which dealt with terminal developments. Finally,
although the increase in AIP funds for security projects in fiscal year
2002

3 This term and others that are used in this report are defined in a
glossary at the end of this report.

Page 4 GAO- 03- 27 AIP Grant Funds

has affected funding for other airport projects, the impact of funding
security projects in fiscal year 2003 is unclear. The impact will depend
on a number of policy decisions. These include determining the extent to
which terminal modifications to install explosives detection systems,
which are estimated to cost between $2 billion and $7 billion, should be
financed with AIP grant funds. 4

The multibillion dollar AIP provides grant funds for capital development
projects at airports included in the National Plan of Integrated Airport
Systems (NPIAS). 5 In administering AIP, FAA must comply with various
statutory formulas and set- asides established by law, which specify how
AIP grant funds are to be distributed among airports (see app. II for a
list of airports that are eligible to receive AIP grant funds). FAA groups
the proposed projects into one of the following seven development
categories, according to each project*s principal purpose:

 Safety and security includes development that is required by federal
regulation and is intended primarily to protect human life. This category
includes obstruction lighting and removal; fire and rescue equipment;
fencing; security devices; and the construction, expansion, or improvement
of a runway area.

 Capacity includes development that will improve an airport for the
primary purpose of reducing delay and/ or accommodating more passengers,
cargo, aircraft operations, or based aircraft. This category includes
construction of new airports; construction or extension of a runway,
taxiway, or apron; and construction or expansion of a terminal building.

 Environment includes development to achieve an acceptable balance
between airport operational requirements and the expectations of the
residents of the surrounding area for a quiet and wholesome environment.
This category includes noise mitigation measures for residences or public
buildings, environmental mitigation projects, and the installation of
noisemonitoring equipment.

4 In P. L. 107- 206, Congress appropriated $738 million to the
Transportation Security Administration for terminal modifications to
install explosives detection systems. 5 NPIAS is a 5- year plan that
identifies airports development projects that are critical to ensuring a
safe and efficient national airspace system. Background

Page 5 GAO- 03- 27 AIP Grant Funds

 Planning includes development needed to identify and prioritize specific
airport development needs. This category includes the airport master plan,
airport layout plan, a state system plan study, or an airport feasibility
study.

 Standards include development to bring existing airports up to FAA*s
design criteria. This category includes the construction, rehabilitation,
or expansion of runways, taxiways, or aprons; the installation of runway
or taxiway lighting; the improvement of airport drainage; and the
installation of weather reporting equipment.

 Reconstruction includes development to replace or rehabilitate airport
facilities, primarily pavement and lighting systems that have deteriorated
due to weather or use. This category includes the rehabilitation or
reconstruction of runways, taxiways, apron pavement, and airfield
lighting.

 Other includes all other development necessary for improving airport
capacity and the safe and efficient operations. This category includes
people movers, airport ground access projects, parking lots, fuel farms,
and training systems. It also includes development for converting military
airfields to civilian use, such as those authorized by the military
airport program.

FAA has traditionally assigned the highest priority to safety and security
projects that are mandated by law or regulation. Shortly after September
11, in response to increased security requirements and in exercising the
authority granted under the Federal Aviation Reauthorization Act of 1996,
FAA reviewed its AIP eligibility requirements and made several changes to
permit the funding of more security projects that previously had not been
funded by AIP. For example, FAA broadened the list of eligible projects to
include explosives detection canines, cameras in terminals, and blast
proofing of terminals. According to officials in FAA*s Airport Planning
and Programming Division, the types of security projects eligible for AIP
funding were expanded because the perceived threat area at an airport grew
from those areas immediately surrounding an aircraft to terminal areas
where large numbers of people congregated. Table 1 summarizes significant
eligibility changes since September 11, 2001.

Page 6 GAO- 03- 27 AIP Grant Funds

Table 1: Changes in AIP Eligibility for Airport Development Projects,
Since September 11, 2001

Project eligibility status Examples of projects

Traditionally eligible to receive AIP funding that are still eligible
Computerized access control for ramp

areas, closed- circuit television at ramp access doors, explosives
detection devices used to inspect suspicious packages, fingerprinting
equipment, perimeter fencing, explosives disposal equipment, centralized
security office, police vehicles identified in security plans, and
planning for new security requirements

Eligible to receive AIP funding since September 11, 2001 Explosives
detection canines and

kennels, cameras, additional security lighting, motion sensors, body
armor, blast proofing of terminals and glass, checkpoint exit lane
technology, cargo area security equipment or facilities, and land to
construct security facilities.

No longer eligible to receive AIP funding because these projects are now
the responsibility of the Transportation Security Administration

Air carriers* preboard screening devices (x- ray and metal detection);
baggage screening devices, such as explosives detection systems; metal
detection hand screening wands; and interactive training systems for
security requirements.

Source: GAO*s presentation of information from FAA.

In November 2001, eligibility for AIP funding was further broadened by the
passage of ATSA, P. L. 107- 71. The act amended 49 U. S. C. Section 47102(
3) to extend eligibility for AIP funding to any additional security-
related activity required by law or the Secretary of Transportation after
September 11, 2001, and before October 1, 2002. ATSA also created the
Transportation Security Administration (TSA) within the Department of
Transportation (DOT), and assigned it primary responsibility for ensuring
security in all modes of transportation. As such, TSA is now responsible
for funding some airport security- related projects, a limited number of
which FAA had previously funded through AIP grant funds. These projects
include preboard screening devices and baggage screening equipment, such
as explosives detection systems.

Page 7 GAO- 03- 27 AIP Grant Funds

In fiscal year 2002, FAA awarded a total of $561 million in AIP grant
funds for airport security projects, which represents about 17 percent of
the $3.3 billion available for obligation. 6 As illustrated in figure 1,
the $561 million is the largest amount awarded for security projects in a
single year and contrasts sharply with past funding trends. Since the
program*s inception in 1982, security projects have accounted for an
average of less than 2 percent of the total AIP grant funds awarded each
year. During fiscal years 1982 through 2001, AIP grant funds awarded to
airports for security projects ranged from $2 million in fiscal year 1982
to $122 million in fiscal year 1991, when airports implemented new
security requirements governing access controls. 7 The $561 million FAA
awarded to airports for security projects in fiscal year 2002 represents
more than 800- percent increase over the $57 million for security projects
awarded in fiscal year 2001.

6 In addition, in fiscal year 2001 FAA awarded $13 million for security
projects related to the events of September 11, 2001. 7 AIP funds awarded
for security projects in 1991 totaled $99 million nominal dollars. FAA Is
Awarding

More AIP Grant Funds to Airports for Security Projects in Fiscal Year 2002
Than in Each Previous Year of the Program*s History

Page 8 GAO- 03- 27 AIP Grant Funds

Figure 1: AIP Grant Funds Awarded for Security Projects, Fiscal Years 1982
through 2002

Note: AIP grant funds awarded in fiscal years 1998 through 2001 were
converted to 2002 constant dollars.

As shown in table 2, among airport types, nearly all of the $561 million
awarded in fiscal year 2002 for security projects was awarded to large,
medium, small, and nonhub airports, 8 which is consistent with where FAA
has received the largest number of requests for AIP grants for security
projects. General aviation and reliever airports received about 1 percent
of the $561 million awarded in fiscal year 2002.

8 For purposes of this analysis, we used FAA*s definition of large,
medium, and small hub airports, whereby large and medium hub airports have
at least 0.25 percent of all passenger enplanements and small hub airports
have between .05 and .25 percent of all enplanements.

Page 9 GAO- 03- 27 AIP Grant Funds

Table 2: Distribution of AIP Grant Funds Awarded for Security Projects by
Airport Type, Fiscal Year 2002

Dollars in millions

Airport type Grant award amount Percentage of total

AIP security funding

Large hub $278.3 50% Medium hub 119.4 21 Small hub 108.3 19 Nonhub 44.9 8
Other commercial service 7.0 1 Reliever and general aviation 3.2 1

Total $561 100%

Source: GAO*s analysis of AIP grant awards.

Based on data provided by FAA, all security projects awarded AIP grants
since September 11, 2001, have met legislative and program eligibility
requirements. Most of these projects would have qualified for AIP funding
under eligibility requirements in place prior to September 11, 2001. For
example, as shown in table 3, perimeter fencing, surveillance and
fingerprinting equipment, and access control systems, which together
accounted for almost half of AIP funding for security projects, qualified
under traditional eligibility regulations.

Table 3: Distribution of AIP Grant Funds Awarded for Security Projects by
Project Type, Fiscal Year 2002

Dollars in millions

Type of security project Grant award amount Percentage of total

security funding

Terminal modifications $249.9 44.5% Access control 141.8 25.3 Surveillance
and fingerprinting equipment 51.4

9.2 Perimeter fencing 78.1 13.9 Explosives detection canines and kennels
1.6 0. 3 Reimbursement of direct costs of meeting security requirements
mandated by ATSA 14.2 2. 5

Other 24.1 4.3

Total $561 100%

Source: GAO*s analysis of AIP grant awards.

AIP Grants Awarded to Airports for Security Projects since September 11,
2001, Met Legislative and Program Eligibility Requirements

Page 10 GAO- 03- 27 AIP Grant Funds

Other projects that would not have qualified for AIP funding prior to
September 11, 2001, such as explosives detection canines and kennels, are
now eligible under legislative and administrative changes implemented
since then. Section 119( a) of ATSA amended 49 U. S. C. Section 47102( 3)
to permit funding of any security- related activity required by law or the
Secretary of Transportation after September 11, 2001, and before October
1, 2002. In addition, ATSA also amended 49 U. S. C. Section 47102( 3) to
make the replacement of baggage conveyor systems and terminal
modifications that the Secretary determines are necessary to install
explosives detection systems eligible for AIP grants.

In addition to the AIP eligibility changes in ATSA, FAA issued a series of
program guidance letters in the winter of 2002 that either restated or
clarified project eligibility requirements as defined under 49 U. S. C.
Section 47102( 3). Under FAA*s Program Guidance Letter 02- 2, requests for
AIP grant funds for security projects after September 11, 2001, are
divided into the following three categories:

 Unquestionably eligible projects include those that are intended to
prevent unauthorized individuals from accessing the aircraft when it is
parked on aprons, taxiways, runways, or any other part of the airport*s
operations area.

 Projects eligible with additional justification include automated
security announcements over public address systems and terminal
improvements for checked baggage or passenger screening.

 Projects that appear to exceed known requirements include those related
to areas of a police facility, command and control or communications
centers that support general law enforcement duties, and equipment federal
screeners use to screen passengers and baggage.

Page 11 GAO- 03- 27 AIP Grant Funds

The unprecedented increase in AIP grant funds awarded to airports for
security projects in fiscal year 2002 has affected the amount of funding
available for some airport development projects, in comparison with fiscal
year 2001. FAA Airport Planning and Programming officials stated that they
were able to fully fund many program priorities, including:

 all set- aside requirements, such as the noise mitigation and reduction
program and the military airport program;

 all safety projects, including those related to FAA*s initiatives to
improve runway safety and reduce runway incursions;

 congressional earmarks; and

 all phased projects that had been previously funded with AIP grant
funds, including the 10 runway projects which are being built at primary
airports. 9

According to FAA Planning and Programming officials, a variety of factors
enabled them to reduce the impact of awarding $561 million in AIP grant
funds for security projects. Most notable was the record level of
carryover apportionments, which totaled $355 million, and the $84 million
in grant funds that FAA recovered from prior- year projects. FAA
subsequently converted these funds into discretionary funds and used $333
of the $439 million to offset the discretionary funds that were provided
for security projects. The remaining $106 million was used to fund other
airport development projects, such as some new capacity, standards, and
reconstruction projects, which FAA initially believed it would not be able
to fund because of the need to ensure that security projects were given
the highest priority for AIP funding.

However, when comparing grant award amounts for fiscal years 2001 and
2002, the $504- million increase in AIP grant funds for security projects
in fiscal year 2002 contributed to a decrease in the amount of funding
available for nonsecurity development projects. For example, as shown in
table 4, the greatest reduction occurred in standards, which decreased by
$156 million, from almost 30 percent of AIP funding in fiscal year 2001 to
25 percent of AIP funding in fiscal year 2002. The next largest reduction
occurred in reconstruction, which decreased by $148 million, from almost
23 percent of AIP funding in fiscal year 2001 to 18 percent in fiscal year

9 See appendix I for list of runway projects at major airports. Increase
in AIP

Funding for Security Projects Has Affected Funding for Some Airport
Development Projects in Fiscal Year 2002 and Could Have a Greater Effect
in Fiscal Year 2003

Page 12 GAO- 03- 27 AIP Grant Funds

2002. Environment, safety, and capacity projects also decreased by $97
million, $66 million, and $40 million, respectively.

Table 4: Distribution of AIP Grant Funds by Development Category, Fiscal
Years 2001 and 2002

Dollars in millions

Development category 2001 grant award amount 2002 grant award

amounts Difference between

2001 and 2002 grant award amounts Percentage of

2001 budget Percentage of 2002 budget

Capacity $517.9 $477.6 $- 40.3 15.8% 14.8% Environment 417.0 319.8 -97.2
12.7 9. 9 Planning 55.5 53.5 -2.0 1. 7 1.7 Reconstruction 740.7 592.7
-147.9 22.6 18.4 Safety 203.7 137.5 -66.2 6. 2 4.3 Security 56.6 561.0
504.4 1. 7 17.4 Standards 968.1 812.4 -155.6 29.5 25.2 Other 323.7 266.8
-56.9 9. 9 8.3

Totals $3,283 $3,222 $- 62 100% 100%

Source: GAO*s analysis of AIP grant awards.

Airport Council International also stated that the increase in AIP funding
for security has affected other airport development projects. It reported
that airports have delayed almost $3 billion in airport capital
development, most of which dealt with terminal developments, because of
new security requirements.

According to FAA Airport Planning and Programming officials, the decreases
in AIP funding for the nonsecurity categories cannot be attributed solely
to the increase in funding for security. For example, they stated that the
decrease in the safety category occurred because the types of projects
identified as necessary to comply with Part 139 safety regulations vary
from year to year based on a number of factors, including the results of
airport certification inspections and individual airports* equipment
retirement policies. The decline in the environment category, which
includes noise mitigation, occurred, in part, because the amount of
discretionary funds available in fiscal year 2002 was lower than in fiscal
year 2001, according to FAA Airport Planning and Programming officials.
The noise mitigation and reduction program is required by statute to
receive 34 percent of available discretionary funds.

The increase in AIP funding for security also affected the distribution of
AIP grant funds by airport type. As shown in table 5, in comparison with
fiscal year 2001, large and small hub airports received increases in AIP
funding, while all other airports experienced decreases in fiscal year
2002.

Page 13 GAO- 03- 27 AIP Grant Funds

AIP funding to large hub airports increased by almost $111 million, or
almost 4 percent of total AIP funding, while funding to small hub airports
increased by almost $32 million, or 1 percent, in fiscal year 2002. In
contrast, the greatest reductions in AIP funding were among nonhub
airports, which decreased from almost $650 million in fiscal year 2001 to
almost $510 million in fiscal year 2002, followed by reliever airports,
which decreased from $213 million in fiscal year 2001 to almost $164
million in fiscal year 2002.

Table 5: Distribution of AIP Grant Funds by Airport Type, Fiscal Years
2001 and 2002

Dollars in millions

Airport type 2001 grant award amount 2002 grant award

amount Difference between

2001 and 2002 grant award amount Percentage of

2001 budget Percentage of 2002 budget

Large hub $745.9 $856.8 $110.9 22.7% 26.6% Medium hub 446.9 435.6 -11.3
13.6 13.5 Small hub 475.6 507.3 31.7 14.5 15.7 Non hub 649.9 509.5 -140.4
19.8 15.8 Other commercial service 59.4 49.2 -10.2 1. 8 1.5 General
Aviation 424.3 423.6 -. 7 12.9 13.1 Reliever 213.2 163.8 -49.3 6. 5 5.1
System planning 268.1 275.7 7.6 8. 2 8.6

Totals $3,283 $3,222 $- 62 100% 100%

Source: GAO analysis of AIP grant awards.

The increase in AIP funding for security projects contributed to the
decreases in the amount of funding available for some airports. For
example, the increase in AIP funding to large hub airports can be
attributed to their proportionally higher security needs. In the case of
the decrease in AIP funding to nonhub airports, FAA Airport Planning and
Programming officials said that their security needs were much lower than
those of large hub airports, accounting for only $44 million, or 8
percent, of the $561 million awarded in fiscal year 2002.

The unprecedented $504 million increase in funding for security also
affected the LOI payment schedules that FAA planned to issue in fiscal
year 2002. FAA deferred three LOI payments that were under consideration
prior to September 11, 2001, that totaled $28 million, until fiscal year
2003 or later. Letters of intent are an important source of longterm
funding for capacity projects at large airports. These letters represent a
nonbinding commitment from FAA to provide multiyear funding to airports
beyond the current authorization period. As a result, airports are able to
proceed with projects without waiting for future AIP grant funds with the
understanding that allowable costs will be reimbursed. The

Page 14 GAO- 03- 27 AIP Grant Funds

following three airports did not have discretionary funds included in
their scheduled LOI payments for fiscal year 2002:

 Hartsfield International Airport in Atlanta, Georgia, which is the
busiest airport in the country, with almost 40 million enplanements per
year. It also was one of the most delayed airports in 2000 and 2001, and
had $10 million for a runway extension deferred.

 Cincinnati/ Northern Kentucky Airport in Covington, Kentucky, a large
airport with 11 million enplanements per year, had $10 million deferred.

 Indianapolis Airport in Indianapolis, Indiana, a medium- sized airport
with almost 4 million enplanements per year, had $7.5 million for a new
apron and taxiway deferred.

According to FAA Airport Planning and Programming officials, prior to
September 11, 2001, the agency had planned to include discretionary
funding in fiscal year 2002 for the LOI payments scheduled to these three
airports. However, their funding has been deferred until fiscal year 2003
or later because of the need to ensure that adequate funds would be
available for security projects. Nontheless, these officials stated that
for each of these three airports, the letters of intent were adjusted
upward to compensate the airports for the additional carrying costs they
incurred because the payments were deferred.

Moreover, FAA Airport Planning and Programming officials believe that
reduced funding for capacity projects in fiscal year 2002 will not have
dramatic consequences in the immediate future because of the current
decline in passenger traffic. However, they stated that if capacity
projects continue to be underfunded, the congestion and delay problems
that plagued the system in 2000 and 2001 could return when the economy
recovers. Similarly, FAA officials stated that although a 1- year
reduction in AIP funding for reconstruction projects would not have a
dramatic impact on runway pavement conditions, a sustained reduction could
cause significant deterioration in pavement conditions.

Finally, the effect of increasing AIP grant funds for security projects in
fiscal years 2003 and beyond cannot currently be estimated with any
certainty. Nonetheless, preliminary indications suggest that the total
amount of funding needed for security projects in fiscal years 2003 and
beyond could be substantially higher than in fiscal year 2002 and previous
years. For example, security projects in the 1998 through 2002 NPIAS
report to Congress totaled $143 million, while security requests in the
current NPIAS, 2001 through 2005, have increased to $1.6 billion. Most of

Page 15 GAO- 03- 27 AIP Grant Funds

the uncertainty over how much funding is needed is dependent on pending
decisions by Congress in conjunction with DOT, TSA, and FAA regarding how
TSA plans to fund the terminal modifications needed to install and deploy
explosives detection systems and the extent to which AIP grant funds might
be needed to help cover these costs. DOT*s Inspector General testified
that capital costs associated with deploying the new explosives detection
systems alone could exceed $2. 3 billion. Representatives of Airport
Council International and the American Association of Airport Executives
stated that the costs for modifying terminals and baggage conveyor system
to accommodate explosives detection systems could be as high as $7
billion. In P. L. 107- 206, Congress appropriated $738 million to the
Transportation Security Administration for terminal modifications to
install explosives detection systems.

To determine how the amount of AIP grant funds awarded to airports for
security projects before September 11, 2001, compared with funds awarded
after September 11, we obtained AIP expenditure data for fiscal years 1982
through 2002 from FAA*s AIP database that showed the amounts of AIP grant
funds awarded, the types of projects funded, and the types of airports
that received the funds. To identify funding trends, we compared the
amount of AIP funding awarded for security- related projects with other
airport development projects for fiscal years 1998 through 2002. To
develop a more realistic comparison of how much AIP funding has increased
over time, we converted nominal dollar figures into constant 2002 dollars,
using fiscal year price indexes constructed from gross domestic product
price indexes prepared by the U. S. Department of Commerce. We
subsequently discussed the data and our findings with FAA Airport Planning
and Programming officials. While we verified the accuracy of the AIP
expenditure data, we did not independently review the validity of FAA*s
AIP database, from which the data were derived.

To determine whether the new security projects met legislative and program
eligibility requirements, we reviewed title 49 of U. S. C., ATSA, and
FAA*s regulations and recently issued program guidance for eligibility
requirements. We also interviewed FAA Airport Planning and Programming
officials to clarify questions regarding eligibility requirements and to
obtain additional information on the distribution of AIP grant funds.

To assess how the use of AIP grant funds for security projects affected
other airport development projects, we compared the amount of AIP grant
funds awarded in fiscal years 2001 and 2002 by development category and
airport type. We also interviewed FAA, TSA, and Airport Council Scope and

Methodology

Page 16 GAO- 03- 27 AIP Grant Funds

International officials and reviewed the preliminary results of the
Council*s survey of its members regarding changes to the status of their
capital development projects due to the events of September 11, 2001.

We provided the Department of Transportation with a copy of the draft
report for its review and comment. FAA and TSA officials agreed with
information contained in this report and provided some clarifying and
technical comments that we made where appropriate.

We performed our work from June through October 2002 in accordance with
generally accepted government auditing standards.

Unless you publicly announce its contents earlier, we plan no further
distribution of this report until 10 days from the date of this letter. At
that time, we will send copies to interested congressional committees; the
Secretary of Transportation; the Administrator, FAA; and the
Administrator, TSA. We will also make copies available to others upon
request. This report is also available at no charge on GAO*s Web site at
http:// www. gao. gov.

Please contact me or Tammy Conquest at (202) 512- 2834 if you have any
questions. In addition, Jean Brady, Jay Cherlow, David Hooper, Nancy
Lueke, and Richard Swayze made key contributions to this report.

Gerald L. Dillingham, Ph. D Director, Physical Infrastructure Issues
Agency Comments

Appendix I: List of Runway Projects at Major Airports

Page 17 GAO- 03- 27 AIP Grant Funds

Airport Runway status Projected opening date

William B Hartsfield Atlanta International Under construction 2006
Cleveland- Hopkins International Under construction 2004 Denver
International Under construction 2003 Detroit Metropolitan Wayne County
Construction completed Opened 2001 George Bush Intercontinental Under
construction 2003 Miami International Under construction 2003 Minneapolis-
St. Paul International/ World- Chamberlain Under construction 2004 Orlando
International Under construction 2003 Lambert- St Louis International
Under construction 2006 Seattle- Tacoma International Under construction
2006

Source: GAO*s presentation of data provided by FAA.

Appendix I: List of Runway Projects at Major Airports

Appendix II: Airports Eligible to Receive AIP Funding

Page 18 GAO- 03- 27 AIP Grant Funds

Appendix II: Airports Eligible to Receive AIP Funding

Glossary Page 19 GAO- 03- 27 AIP Grant Funds

Statutory provisions require that AIP funds be apportioned by formula each
year to specific airports or types of airports. Such funds are available
to airports in the year they are first apportioned and they remain
available for the 2 fiscal years immediately following (or 3 fiscal years
for nonhub airports). Recipients of apportioned funds are primary
airports, cargo service airports, states and insular areas, and Alaska.

The paved part of an airport*s airfield immediately adjacent to terminal
areas and hangars.

Grants that are to be used for preserving or enhancing the capacity,
safety, security, and carrying out noise compatibility planning and
programs at primary and reliever airports.

Airports that, in addition to any other air transportation services that
may be available, are served by aircraft providing air transportation only
of cargo with a total annual landing weight (the weight of aircraft
transporting only cargo) of more than 100 million pounds.

Funds apportioned for primary or cargo service airports, states, and
Alaskan airports remain available for obligation during the fiscal year
for which the amount was apportioned and the 2 fiscal years immediately
after that year (or the 3 fiscal years immediately following that year in
the case of nonhub airports). When such funds are not used in the fiscal
year of the apportionment, they are carried over to following year( s).

Airports that handle regularly scheduled commercial airline traffic and
have at least 2,500 annual passenger enplanements.

Those funds generally remaining after apportionment funds are allocated,
but a number of statutory set- asides are established to achieve specified
funding minimums.

Passenger boardings. Glossary

Apportionment funds Apron Capacity, safety, security, and noise projects

Cargo service airports Carryover apportionments

Commercial service airports

Discretionary funds Enplanements

Glossary Page 20 GAO- 03- 27 AIP Grant Funds

Airports that have no scheduled commercial passenger service. Primary
airports that have at least 1 percent of all annual enplanements. A letter
FAA issues to airports stating that it will reimburse them for the costs
associated with an airport development project according to a defined
schedule when funds become available. FAA uses this letter when its
current obligating authority is not timely or adequate to meet an
airport*s planned schedule for a project.

Primary airports that have between .25 percent and 1 percent of all annual
enplanements.

Under this program, a special set- aside of the discretionary portion of
AIP is to be used for capacity and/ or conversion- related projects at up
to 15 current and former military airports. Such airports are eligible to
participate in the program for 5 fiscal years and may be extended for 5
more years if approved by the Secretary of Transportation. The airports
are designated as a civil commercial service or reliever airport in the
national airport system. Approved projects must be able to reduce delays
at an existing commercial service airport that has more than 20,000 hours
of annual delays in commercial passenger aircraft takeoffs and landings.

The set of airports designated by FAA as providing an extensive network of
air transportation to all parts of the country. It is comprised of
commercial service airports and general aviation airports.

AIP projects that reduce airport- related noise or mitigate its effects.
Eligible noise projects generally fall into the following categories: land
acquisition, noise insulation, runway and taxiway construction (including
associated land acquisition, lighting, and navigational aids),
noisemonitoring equipment, noise barriers, and miscellaneous.

Primary airports that have over 10, 000 annual enplanements, but less than
.05 percent of all annual enplanements. General aviation airports

Large hub airports Letter of Intent

Medium hub airports Military airport program

National airport system Noise projects

Nonhub airports

Glossary Page 21 GAO- 03- 27 AIP Grant Funds

An obligation occurs when FAA makes an award to an airport sponsor,
thereby obligating FAA to fund a project under AIP.

Airports that have between 2,500 and 10,000 annual passenger enplanements
from scheduled commercial service.

Airports that have 10,000 or more annual passenger enplanements from
scheduled commercial service.

Airports designated by FAA to relieve congestion at a commercial service
airport and to provide improved general aviation access to the overall
community. Only general aviation airports have been designated as reliever
airports.

The portion of discretionary funds set- aside designed to achieve
specified funding minimums established by Congress.

The passenger facility charge program requires large and medium hub
airports participating in the program to return a portion of their AIP
apportionment funds. Airports charging a passenger facility charge of
$3.00 or less must return up to one- half of their AIP apportionment
funds, and airports charging over a $3.00 passenger facility charge must
return up to 75 percent of their AIP apportionment fund*s. Congress
requires most of the returned AIP funds to be put in the small airport
fund, which FAA redistributes to small airports.

Primary airports that have from .05 percent to .25 percent of all annual
enplanements.

States assume responsibility for administration of AIP grants at airports
classified as other than primary (other commercial service, reliever, and
general aviation airports). Each state is responsible for determining
which locations within its jurisdiction will receive funds and for ongoing
project administration. This program is available only to selected states.
Obligation

Other commercial service airports

Primary airports Reliever airports

Set- aside funds Small airport fund

Small hub airports State block grant program

Glossary Page 22 GAO- 03- 27 AIP Grant Funds

AIP grants for the purpose of studying aspects of a regional or statewide
airport system. These studies usually include primary and nonprimary
airports. Most system planning grants are issued to metropolitan planning
organizations or state aviation agencies.

Paved sections of an airport*s airfield that connect runways with aprons.
System planning

Taxiway

(540033)

The General Accounting Office, the investigative arm of Congress, exists
to support Congress in meeting its constitutional responsibilities and to
help improve the performance and accountability of the federal government
for the American people. GAO examines the use of public funds; evaluates
federal programs and policies; and provides analyses, recommendations, and
other assistance to help Congress make informed oversight, policy, and
funding decisions. GAO*s commitment to good government is reflected in its
core values of accountability, integrity, and reliability.

The fastest and easiest way to obtain copies of GAO documents at no cost
is through the Internet. GAO*s Web site (www. gao. gov) contains abstracts
and fulltext files of current reports and testimony and an expanding
archive of older products. The Web site features a search engine to help
you locate documents using key words and phrases. You can print these
documents in their entirety, including charts and other graphics.

Each day, GAO issues a list of newly released reports, testimony, and
correspondence. GAO posts this list, known as *Today*s Reports,* on its
Web site daily. The list contains links to the full- text document files.
To have GAO e- mail this list to you every afternoon, go to www. gao. gov
and select *Subscribe to daily E- mail alert for newly released products*
under the GAO Reports heading.

The first copy of each printed report is free. Additional copies are $2
each. A check or money order should be made out to the Superintendent of
Documents. GAO also accepts VISA and Mastercard. Orders for 100 or more
copies mailed to a single address are discounted 25 percent. Orders should
be sent to:

U. S. General Accounting Office 441 G Street NW, Room LM Washington, D. C.
20548

To order by Phone: Voice: (202) 512- 6000 TDD: (202) 512- 2537 Fax: (202)
512- 6061

Contact: Web site: www. gao. gov/ fraudnet/ fraudnet. htm E- mail:
fraudnet@ gao. gov Automated answering system: (800) 424- 5454 or (202)
512- 7470

Jeff Nelligan, managing director, NelliganJ@ gao. gov (202) 512- 4800 U.
S. General Accounting Office, 441 G Street NW, Room 7149 Washington, D. C.
20548 GAO*s Mission

Obtaining Copies of GAO Reports and Testimony

Order by Mail or Phone To Report Fraud, Waste, and Abuse in Federal
Programs

Public Affairs
*** End of document. ***