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Obama Administration’s FY 2016 Budget Includes Potential Tweaks to Airport Funding Mechanisms

Obama Administration’s FY 2016 Budget Includes Potential Tweaks to Airport Funding Mechanisms

The Obama administration’s fiscal year 2016 budget includes approximately $95 billion for a broad array of transportation-related projects. Included in that category of spending are several interesting aviation infrastructure improvement earmarks.

Of those aviation infrastructure improvements, the fiscal year 2016 budget proposes $2.9 billion in targeted airport capital spending through the Airport Improvement Program (also known as the “AIP”). Although $2.9 billion is a very large number, it is actually a $450 million reduction to the AIP budget as compared to fiscal year 2015.

Another interesting feature of the fiscal year 2016 budget is a proposal to increase the Passenger Facility Charge (also known as the “PFC”) program from $4.50 per boarded passenger to $8.00 per boarded passenger. The PFC is a fee charged to each passenger who boards a commercial flight. The increase in the PFC appears to be somewhat of a trade-off for airports in compensation for the reduction in AIP funding. In addition, the Federal Aviation Administration (the “FAA”) has suggested that AIP funding would be somewhat refocused on smaller and general aviation airports, which signals a potential move away from more typical funding for large hub airports.

Airport officials often pair bond financing with AIP funds to complete airport infrastructure upgrades. Airport officials also have the ability, with FAA approval, to use PFC revenues to repay some, or even all, of the debt service associated with bond financing.

Finally, of note, the fiscal year 2016 budget includes $956 million for the “Next Generation Air Transportation System” (also known as “NextGen”), which is a satellite-based air traffic control system that is intended to replace the currently used ground-based radar system.

It will be interesting to see how the conversations continue with respect to the proposed fiscal year 2016 budget as the October 1 fiscal year commencement date approaches.

A link to the proposed budget and an explanation of the major categories is available at https://www.whitehouse.gov/omb/budget.

Blake C. Sharpton

Blake Sharpton