AAAE: Administration Releases More Details on Infrastructure Plan
The White House today released a 53-page document that includes more details on a $1.5 trillion infrastructure plan that calls for $200 billion in federal funds to help stimulate private and local investment in our nation's infrastructure. The President sent his proposal to Capitol Hill on the same day the administration unveiled its budget request for Fiscal Year 2019.
As we reported this morning, the White House yesterday released a two-page fact sheet that suggests that the White House plan will return decision-making authority to state and local governments and remove regulatory burdens that hold up infrastructure projects. It also calls for making infrastructure investments in rural areas.
The administration's plan includes some changes for AIP and a modest proposal to expand the streamlined PFC process to small hubs. But it fails to raise or eliminate the federal cap on local PFCs. AAAE President and CEO Todd Hauptli again urged Congress and the administration to back a bipartisan provision in the Senate version of the FY18 DOT spending bill to raise the cap to $8.50 for originating passengers.
"For airports, the answer to building infrastructure is as easy as PFCs. Lifting the outdated federal cap on airport user fees would allow airports to utilize local dollars for investment immediately and to leverage those resources through bonds to further multiply their benefit into the future - 100 percent consistent with what the President has outlined today," Hauptli said. "If Washington is serious about airport infrastructure investment, it will move quickly to approve the bipartisan proposal on PFCs that is under consideration as part of the FY 2018 budget package."
Additional Provisions for Infrastructure Improvements at Airports
The administration's detailed proposal includes the following items specifically targeted to airports:
PFC Streamlining: The White House is calling for extending the PFC streamlining program from non-hub to small hub airports. The administration points out that extending the streamlined PFC process to small hub airports would "reduce delays and unnecessary requirements in the PFC process." But the House and Senate versions of the FAA reauthorization bill already include broader proposals to expand PFC streamlining to all hub sizes.
Oversight of Non-Aviation Development: The administration is proposing to "limit FAA oversight of non-aviation development activities at airports." The White House indicates that agency reviews of non-critical airfield infrastructure such as terminals, access and service roads and hangars can burden the FAA and slow project delivery.
AAAE and ACI-NA have been urging Congress and the administration to eliminate the FAA's role in approving the disposal, use, or leasing of non-airfield property purchased without federal funding. We have also been proposing to do away with the agency's role in approving non-aeronautical improvements except to ensure safety of aircraft operations.
Airport Privatization Pilot Program: The administration's plan would make it easier for more airports to participate in the Airport Privatization Pilot Program, which the White House says will "reduce barriers to alternative project delivery."
Under current law, 10 airports are allowed to participate in the program, and only one of those airports may be a large hub. The White House is proposing to remove the limitation on the number and size of airports that can participate in the program. Today, 65 percent of air carriers at an airport must sign off on that airport's participation in the program. The administration's plan would reduce that threshold to a majority vote.
Incentive Payments: The White House is also recommending changing the AIP program to allow incentive payments for accelerated construction. The latest document suggests that permitting "additional financial incentives, along with profit margin, for contractors would increase work efficiency and reduce project completion times."
AAAE and ACI-NA have been urging Congress to approve the use of incentive payments as part of the FAA reauthorization bill. We have pointed out that completing projects early could be particularly helpful to airports in northern tier states with short construction cycles and when short-term FAA reauthorization extensions prevent the FAA from distributing AIP grants in a timely manner.
Post-Expenditure Audits: The administration is proposing to "move oversight of AIP funds to post-expenditure audits" in order to reduce delays. The White House suggests that post-expenditure audits "would expedite conveyance of funds to sponsors." AAAE has been urging Congress and the administration to consider similar changes to the PFC review and approval process, which can take several months to complete.
Funding and Financing Infrastructure Improvements
Infrastructure Incentives Program: The White House is calling for 50 percent of requested federal funds - or $100 billion - to be used to create an "Incentives Program to spur additional dedicated funds from States, localities, and the private sector." The administration indicates that applications "will be evaluated on objective criteria." Eligible projects would require a local match of at least 80 percent.
Rural Infrastructure Program: The White House plan calls for $50 billion of the $200 billion in requested funds to be designated for infrastructure projects in rural America. The latest summary suggests that "the bulk" of funds would go to governors and give states "the flexibility to prioritize their communities' needs." The remaining funds would be distributed through so-called "performance grants."
The 53-page document that the administration released today confirms that airports in rural areas would be eligible for funding in this program. However, they would likely face stiff competition since the program could be used to fund a variety of infrastructure projects including roads, bridges, rail, water and waste, power and electric, broadband, etc.
Transformative Projects Program: The administration is proposing to use $20 billion for "innovative and transformative infrastructure projects." The White House suggests that this program "will focus on projects that could have a significant positive impact on States, cities, and localities, but may not attract private sector investment...." This program would require a local match of at least 50 percent for project planning and 20 percent for construction.
Infrastructure Financing Programs: The administration's plan includes $20 billion for infrastructure financing proposals to help "advance complex infrastructure projects."
• TIFIA: Of the $20 billion, the White House plan would allocate $14 billion to expand federal credit programs like the Transportation Infrastructure Finance and Innovation Act to ports and airports. TIFIA is a program that currently provides loans and credit assistance for large scale surface transportation projects.
According the administration's plan, allowing TIFIA to "offer loans and other credit assistance to non-Federal waterways and ports and airport projects (such as renovated or new passenger terminals, runways, and related facilities) would incentivize project delivery for airports and ports, and would accelerate overall improvements in airport and seaport infrastructure."
• Private Activity Bonds: The White House proposal calls for $6 billion to expand Private Activity Bonds. The draft six-page summary that was leaked in late January suggested that the administration would recommend eliminating the "Alternative Minimum Tax provision and the Advance Refunding prohibition on PABs." Congress last year repealed advance refunding bonds as part of the tax reform bill.
The administration's latest 53-page document similarly calls for eliminating the AMT preference on PABs and suggests that the move would "lower the borrowing costs and increase the utilization of PABs." However, it does not mention any changes for advance refunding bonds. AAAE and ACI-NA urged Congress and the administration to preserve advance refunding bonds during consideration of the tax reform package.
Disposition of Federal Real Property: The administration's plan would "allow for the disposal of Federal assets to improve the allocation of economic resources in infrastructure investment." The White House suggests that some of these assets "would be better managed by state, local, or private entities." The 53-page document points out that examples of assets for possible divestiture include Ronald Reagan Washington National and Dulles International Airports.
Federal Capital Financing Fund: Another $10 billion would go toward a Federal Capital Revolving Fund, which the administration suggests "will reduce inefficient leasing of Federal real property, which would be more cost-effective to purchase."
While the infrastructure proposals from the administration are an important starting point for the debate, Congress will play a major role in shaping any plan that ultimately moves froward in the months ahead. We will continue to urge lawmakers to provide additional local flexibility through a PFC increase and enhance federal support of key programs, including AIP. Stay tuned for further updates and calls to action.