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Council of State Governments
Government Finance Officers Association
International City/County Management Association
National Association of Counties
National Association of State Auditors, Comptrollers & Treasurers
National Conference of State Legislatures
National League of Cities
United States Conference of Mayors
October 5, 2001
Dear Member of Congress:
The economic impacts of the airport closings during the week of September 11th, and the dramatic decrease in airline travel continue to negatively affect communities across America. Airports, dependent upon consumer travel, have suffered extensively and congressional action is needed to ensure their economic health and ability to serve their communities.
We write to emphasize the serious financial situation facing airports across the country. The nation's airports are largely publicly owned facilities - either by city, county and state entities or regional public authorities. Because of reduced revenues obtained from Passenger Facility Charges (PFCs), parking fees, landing fees, rent, and other revenues, airports, and the communities they serve, are incurring substantial revenue losses. Additionally, the Airport and Airway Trust Funds that are funded by the federal ticket tax and assist with airport infrastructure projects are also threatened with declining receipts.
The loss of revenue from these funding sources directly impacts local and state governments' ability to meet outstanding debt obligations associated with airport construction and renovation, operate airport facilities, and continue or initiate planned capital improvement projects. At the same time, substantial airport resources are now being redirected toward enhanced airport security in the wake of the September attacks.
At this point in time, we simply do not know when, or even if, airline travel and the fees generated by such travel will return to normal. We ask you to consider steps that can be taken by Congress to ensure the financial stability and sustainability of the nation's airports.
We, thus, make the following recommendations:
- Provide Airports with Immediate Funding to Pay for Increased Security
- Airports should be provided with federal reimbursement for the additional costs of security measures mandated by the Federal Aviation Administration (FAA), as well as any subsequent FAA security mandates, with reimbursement covering both accrued as well as ongoing compliance costs. Any federal legislation addressing airport security that imposes additional security measures on airports should include funding mechanisms to reimburse airport operators for their increased security associated with such requirements.
- Establish Priority of Airline Payments to Airports
- Any commercial air carrier receiving federal assistance, loan or a loan guarantee as a result of the Airline Stabilization Act or similar legislation should be required before receiving such assistance to, (i) pay from such assistance all currently due federal, state or local taxes together with PFCs and all other amounts owed to airports and (ii) continue payments during the life of such assistance.
- Ensure Continued Funding for Current and Future Airport Projects
- Because of the sharp decline in revenues, many capital projects that were about to start, or were in progress, will not move forward unless there is federal financial assistance. It is important that funding is secured for airport capital projects, which will directly stimulate local economies and provide construction and related jobs.
- Provide Greater Flexibility for PFC and FAA's Airport Improvement Program (AIP) Funds Use
- Congress should allow airports the ability to temporarily use PFC and AIP funds for security costs and, if needed, to pay outstanding debt obligations.
- Allow Airports to Refinance Debt and Take Advantage of Today's Lower Interest Rates -
Much of the approximately $70 billion borrowed by airports over the last few years is in the form of tax-exempt municipal bonds with 20 to 30 year maturities, with rates fixed typically at the time of borrowing. Over the last year, interest rates on tax-exempt bonds have fallen substantially. Unfortunately, current laws do not allow airports to restructure debt and capture savings as many homeowners do by refinancing their mortgages when interest rates drop. As part of a financial stability package, Congress should permit airports to issue advance refunding bonds to take advantage of today's lower interest rates. By allowing airports to refinance their debt and reduce their interest cost payments, they will have additional financial resources to meet their operational, maintenance and security obligations.
- Assure Access to War-Risk Insurance Coverage -
Unless airports can continue to obtain affordable war-risk insurance coverage, many will be forced to shut down critical operations because of liability concerns. It is vital that Congress provide some form of relief - whether a fix similar to that for the commercial airlines contained in the Air Transportation Safety and System Stabilization Act or outright indemnification, as the Canadian Government has provided its airports - to ensure that airports have continued access to this critical coverage.
- Establish a "Liquidity Facility" to Stabilize Airport Finances -
Congress should provide a temporary liquidity facility to the nation's airports - much as it did for the airlines - that permits airports with the most immediate needs to obtain grants to fund operation and maintenance costs and allows airports to borrow when necessary to fund payments on outstanding debt. The facility should be limited in duration and have enough funding to provide the nation's airports a short-term financial safety net to meet their ongoing obligations in an uncertain environment.
The Airports Council International North America (ACI-NA), and the American Association of Airport Executives (AAAE) advised the House Transportation Committee's Subcommittee on Aviation in their September 25th testimony that airport revenues across the nation had "declined precipitously" and noted that that the decline impacted large and small airports alike - Los Angeles International Airport was losing $1.8 million per day and the Eastern Iowa Airport in Cedar Rapids calculated its losses at more than $12,000 a day. At the very same time airports are suffering these losses, the ACI-NA and AAAE noted that airports are incurring dramatically increased security costs - John Wayne Airport in Orange County, California estimates it will spend an additional $1 million per month on security and Hartsfield International Airport in Atlanta estimates its security costs will increase by $2 million per month.
The impaired cash flow of the nation's airports has not gone unnoticed by the financial markets. Standard & Poor's has placed all North American airports with publicly issued debt on its "CreditWatch" with negative implications, an action that will increase the borrowing costs of those airports unless immediate action is taken to stabilize the airport industry. Moody's Investors Service has taken similar action.
It is imperative that Congress provide immediate financial relief to the airports so that they may continue to serve as a vital component to a communities' economy, pay their operating bills, avoid triggering default mechanisms that will bring about additional downgrades by the rating agencies, and avoid payment default that may lead to acceleration of much of the approximately $70 billion in outstanding debt.
We applaud the attention and action that Congress has extended to the private sector, and to the nation's economic health, and ask that Congress act immediately to provide the nation's airports with a financial stability package so they can continue to operate and benefit the national economy as well as the states and communities they directly serve. We greatly appreciate your attention to this serious matter.
Sincerely,
Council of State Governments, Jim Brown, 202-624-5460
Government Finance Officers Association, Susan Gaffney-Campanella, 202-429-2750
International City/County Management Association, Michael Lawson, 202-962-3634
National Association of Counties, Bob Fogel, 202-393-6226
National Association of State Auditors, Comptrollers & Treasurers, Cornelia Schneider, 202 624-5451
National Conference of State Legislatures, Alysoun McLaughlin, 202-624-5400
National League of Cities, Deborah Rigsby, 202-626-3194
United States Conference of Mayors, Kevin McCarty, 202-293-7330
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