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Safeguarding
Trinity County
Aviation
How are airports funded?
 

The simple answer is that all the people who use our air transportation system pay for the costs of developing and running America's National Airspace System (NAS) and a portion of her public use airports. Included in this group would be people shipping packages, private pilots, airline passengers, and employees flying on corporate shuttles.

Just like the national highway system, much of America's air transportation infrastructure is paid for with a simple tax on all aviation fuels. State and Federal agencies tax this fuel to provide the funds needed to make the NAS work. People who fly on commercial planes pay the fuel tax as part of their ticket price or fuel purchase.

Airport finance today is marked by a prominent Federal role and an even more significant role of debt finance. The Federal role is exerted in two ways,

(1) Airport Improvement Program (AIP) formula and discretionary grants funded by user taxes on airline tickets, aircraft fuel, freight waybills and international departures, and

(2) an exemption from Federal tax on interest income for holders of airport bonds (a "tax expenditure" funded by the general taxpayer).

In addition, the Passenger Facility Charge program (PFC), administered by the FAA, generates local funds to finance airport improvements.

Although airport capital investment today is funded by this combination of airport cash reserves, debt capital raised in the municipal bond, commercial loans, and grants from state and Federal governments, it is the sale of tax-exempt bonds and the provision of Federal grants through the AIP program that finance the lion's share of major capital projects.

Also see The History of Government Airport Funding

The Airport and Airway Trust Fund

The Airport and Airway Trust Fund was established on the books of the United States Department of the Treasury in 1971. The money in the Airport and Airway Trust Fund is used to improve America's air transportation system by funding airport improvements, airport repair projects, and modernizing our Air Traffic Control system.

The Airport and Airway Trust Fund receives revenue through taxes on aviation fuel - including aviation gasoline and jet fuel. In addition to fuels taxes, the Airport and Airway Trust Fund also receives revenue through taxes on domestic airline ticket sales, taxes on ticket sales for passengers traveling overseas, and taxes on air freight shipments.

Federal Fuels Taxes

The Federal government levies a 19.3 cent per gallon tax on the aviation gasoline used by piston-powered propeller aircraft (Avgas) and a 21.8 cent per gallon tax on jet fuel (Jet A). This tax goes directly to the Airport and Airway Trust Fund, with 1/10 of one cent going to environmental protection and cleanup programs.

State Fuels Taxes

When it comes to state aviation fuels taxes, each state is different. California levies a 13.7 cent per gallon tax and the money goes into the state airport fund. In many cases, state aviation fuels taxes are used to fund state contributions to matching grant programs from the Federal government, particularly those under the Federal Airport Improvement Program.

The Airport Improvement Program (AIP)

Since 1980, airports have gotten a significant capital development funding boost from the Federal government in the form of grants. These grants have been issued through the Federal Aviation Administration's Airport Improvement Program (AIP). The AIP provides funds for construction projects, terminal development, safety equipment, snow removal equipment, weather reporting systems, and many other important projects.

A grant provides 90% of the total project cost. The county is responsible for the remaining 10% of the cost. Additional funding may be available from the State of California Division of Aeronautics in the amount of 5% of the total project cost, reducing the County participation to 5%.

Between 1985 and 1995, the AIP financed 14 percent of all capital spending at large commercial airports, 28 percent at medium-sized commercial airports and 41 percent at small airports (small commercial airports as well as reliever and general aviation facilities).

It is from this AIP funding that every airport in Trinity County receives $10,000 each year for insurance, maintenance, and minor improvements.

The following table shows the allocation of AIP fund for fiscal year 1993

__________________________________________________

        Type of Project (percent) 
__________________________________________________ 

Landing areas, construction of runways      22.1 
Landing areas, construction of taxiways     16.4 
Landing areas, construction of aprons       13.9 
Land, other than for noise control           8.1 
Land for noise control                       7.3 
Safety and security                         6.4 
Lighting, navigation aids, and weather
  equipment                                  5.6 
Roadways                                     5.3 
Building, terminals                          4.1 
Noise control, other than land acquisition   3.5 
Miscellaneous                                2.5 
Planning                                     1.9 
State pilot block grant program              1.7 
Building, other                              1.2 
Total                                      100.0% 
___________________________________________________ 

Source: FAA, Twelfth Annual Report of Accomplishments
Under the Airport Improvement Program, FY 1993.

Other Funding Sources

Airports also generate revenue through automobile and aircraft parking fees, the rental of terminal space and maintenance buildings, and in some cases the use of Passenger Facility Fees (PFFs) - the $1, $2 or $3 surcharge that airports add to the price of passenger tickets.

State and local governments also contribute funding to make sure that their airports remain viable and meet the needs of local businesses and communities. In some cases, state and local governments or airport authorities use tax-exempt bonds to fund major capital improvements

Include wording from George's recent newsletter article on trust fund money use.

References

The Airport Improvement Program (AIP)
  • Background Information
  • Program Funding
  • Eligibility Guidelines
  • Capital Improvement Plan (CIP)
Airport Improvement Program, more links
Federal CFDA definition