LEXIS-NEXIS® Congressional Universe-Document

LEXIS-NEXIS® Congressional

FEBRUARY 10, 1999, WEDNESDAY

SECTION: IN THE NEWS

LENGTH: 3788 words

HEADLINE: PREPARED STATEMENT OF
DAVID Z. PLAVIN,
HONORABLE SAMUEL K. SKINNER
AND TODD J. HAUPTLI
ON BEHALF OF
AIRPORTS COUNCIL INTERNATIONAL - NORTH AMERICA
AND AMERICAN ASSOCIATION OF AIRPORT EXECUTIVES
BEFORE THE HOUSE TRANSPORTATION & INFRASTRUCTURE COMMITTEE
AVIATION SUBCOMMITTEE
SUBJECT - THE ECONOMIC IMPACT OF AIRPORTS
AND FUNDING OF AIRPORT CAPITAL DEVELOPMENT

BODY:

Statement of ACI-NA and AAAE on the Economic Impact of Airports and Funding of Airport Capital Development, Before the House Committee on Transportation and Infrastructure Subcommittee on Aviation Subcommittee, February 10, 1999.
Mr. Chairman and Members of the Subcommittee:
I am David Plavin, President of the Airports Council International - North America (ACI-NA). With me are Sam Skinner, the former Secretary of Transportation whom ACI-NA has retained to assist us in promoting the adequate funding of capital development needs at our nation's airports, and Todd Hauptli, Senior Vice President for Federal Affairs of the American Association of Airport Executives (AAAE). We are pleased to be here today to present the views of ACI-NA and AAAE regarding the economic impact of airports and funding the capital development needs of U.S. airports.
As you know, ACI-NA's members are the local, state and regional governing bodies that own and operate commercial service airports in the United States and Canada. ACI-NA member airports serve more than 99 percent of the U.S. domestic scheduled air passenger and cargo traffic and virtually all U.S. scheduled international travel. AAAE is the world's largest professional organization representing the men and women who manage airports. AAAE members manage primary, commercial service, reliever and general aviation airports, which enplane 99 percent of the passengers in the United States.
I would like to begin, Mr. Chairman, by thanking you and members of the full Committee on your expeditious consideration of a short-term reauthorization of the Airport Improvement Program. It is our hope that the Senate will follow the House'sexample and extend AIP for six- months, in order to avoid a lapse in the program which, as you know, would prove devastating to our nation's airports.
Thank you for holding today's hearing on the economic impact of airports, as we believe that it provides an appropriate context for considering the funding needs Of airports as you move forward with an FAA reauthorization bill. As you know, when Sam Skinner was Secretary of Transportation in 1990, he, along with several members of this subcommittee, provided the leadership necessary to achieve passage of the landmark Aviation Safety and Capacity Expansion Act of 1990 that included the Passenger Facility Charge program and the National Noise Policy. I think his perspective on the needs driving the development of the PFC then as they relate to the situation we are facing today will prove enlightening to the subcommittee.
The Economic Impacts of Airports and the Need for Adequate Investment in Airport Infrastructure
It is widely accepted today that an efficient air transportation system is necessary for any industrialized nation to compete in the global economy. Countries around the world have come to realize that they need to invest in airport infrastructure in order to do so. Multi-billion dollar airport projects are commonplace in Asia, and massive capital development projects to build new airports or redevelop existing airports are occurring all over the world.
Last year, when ACI-NA and AAAE testified before this subcommittee, we observed that airports generate and support local, regional, and national economic development by stimulating business activity and investment, attracting andfacilitating travel and tourism, and creating jobs. For example, in 1996, activity at General Mitchell International Airport in Milwaukee, Wisconsin created $1.4 billion in total impact and generated over 18,000 jobs. These jobs resulted in $298 million in earnings.
This local example is repeated throughout the country many times over. In fact, the U.S. Department of Transportation and others have conducted studies that show that, for every $1 billion invested in airport development, approximately 40,000 to 50,000 jobs are created and sustained, with related multiplier spending and tax revenue benefits for local and state governments and the federal government. Investment in our nation's airports, through federal and local user- funded capital development programs, returns enormous dividends to citizens, travelers and shippers, as well as to the airlines and others whose businesses provide or depend upon aviation services.
Last year we reported on a recent survey we conducted that demonstrates that, nationwide, airports generate more than $400 billion in economic activity each year, and create approximately 1.6 million jobs directly at the airports, and another 4.2 million jobs related to the airports. These jobs create more than $155 billion in salary and wages to support workers and their families; and more than $31 billion in taxes is generated for local, state and federal governments.
These numbers indicate the order of magnitude of the benefits that airports add to the local, regional, and national economies. Moreover, as you travel throughout the country, you can literally find concrete examples of the economic developmentgenerated by airports. Industrial parks, office buildings, high tech centers, and other facilities all spring up around airports.
As a local example, consider the development that has arisen between Washington, DC and Dulles International Airport. What was once a rural countryside is now a burgeoning area of offices and high tech industry. Last December, the Washington Post reported that nearly 10 million square feet of commercial construction is underway within a twenty-minute drive of Dulles. The Post observed that this new construction is equivalent to one-third of the total office space in Denver, Atlanta, or Seattle. Existing office space in the Dulles Corridor already amounts to the 14th greatest concentration of office space in the United States. This phenomenon is repeated in countless areas of the country. Just ask your local businesses or Chambers of Commerce how important the local airport is to the ability of companies in your home districts to develop and thrive.
When cities or counties in your district seek to attract a major new manufacturing plant or the headquarters of a large corporation, ask them what are the key factors considered by the companies siting those facilities. Ready access to an airport with good air service is most likely at or near the top of the list. Providing the facilities necessary to meet the demands of the travelling public, including businesses that rely on our air transportation system for their lifeblood, is a fundamental responsibility: that airports-take very seriously. As we have pointed out time and again, our nation cannot fully realize the economic benefits that airports can provide if we fail to invest adequately in airportinfrastructure systems and capacity to accommodate the growth in air travel demand. When David Hinson was Administrator of the FAA, he often stated that airports were becoming the choke point of the entire air transportation system.

For the sake of our national, regional, and local economies, we cannot allow that to happen. We must provide adequate investment in airport infrastructure so that we do not stifle our strong and growing economy.
In that regard, we commend this subcommittee and the full Transportation and Infrastructure Committee -- particularly Chairman Shuster and Ranking Member Oberstar -- for the leadership you have shown in introducing H.R. 1 11, a bill to take the Airport and Airway Trust Fund off-budget to ensure that revenues collected from air travelers are used for their intended purpose. Such budgetary treatment for the trust fund, in conjunction with eliminating the $3 federal restriction on local PFCs will comprise a well-rounded approach to funding that benefits all-sized airports and all air passengers.
Your recognition that there must still be a contribution to the federal aviation programs from the General Fund, to reflect the use of, and benefits received from, the aviation system by federal agencies and the general public is a crucial insight that must be reflected in legislation as it makes its way through Congress. Clearly, at the end of the process, we must ensure that more funds are spent on aviation infrastructure -- including more funding for airports. Airports capital development needs have been independently verified at at least $10 billion per year (including at least $6 billion a year in AIP eligible projects), and existing funding sources fall $3-4 billion short of that - without including facilities that will be needed to meet themushrooming demand for air travel. We share your goals and pledge our support for your effort to achieve budgetary reform for the Airport & Airway Trust Fund and a significant increase in federal investment in our infrastructure. Airports believe the objective of increased investment at all levels, benefiting all-sized airports, is best achieved through elimination of the PFC cap, tied to a shift in AIP funds to smaller airports, in addition to budgetary reform of the trust fund.
I must emphasize that increasing AIP funding is critically important, especially to meeting the needs of smaller airports. However, increasing AIP funding levels, alone, is not enough to meet the needs of the system. AIP grants are an excellent funding mechanism for airfield facilities, which are desperately needed. More funding will definitely provide more capacity and safety benefits. To the extent that lack of airfield capacity is a constraint on airline operations, AlP funding can also help to enhance competition. However, AIP funding is not available for gates and related facilities, which are also needed to enhance competition. In some cases, these are the critical facilities that are needed to allow new entry. Also, AIP funding is typically not available for groundside access projects, yet groundside access congestion may be the biggest cause of delay and inconvenience for passengers. Airlines are understandably not enthusiastic about supporting projects that do not directly benefit their bottom fine, so it is often difficult to fund such projects from airline rates and charges. PFCs, which are, after all, paid by passengers, are an excellent way - sometimes the only way - for airports-to fund projects that enhance competition or improve-the movement of passengers to and through airports. These are the types of projects that benefit passengers but not necessarily the airlines. They are important. They should be funded. And they are not funded by AIP.At this point, I would like to ask Sam Skinner to provide his perspective on airport funding needs and our further proposal for lifting the PFC cap as a way to help meet those needs.
*****
STATEMENT OF THE HONORABLE SAMUEL K. SKINNER ON BEHALF OF ACI-NA AND AAAE, BEFORE THE HOUSE COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE, SUBCOMMITTEE ON AVIATION, CONCERNING AIRPORT CAPITAL FUNDING NEEDS, FEBRUARY 10, 1999
Mr. Chairman and Members of the Subcommittee:
It is a pleasure to appear before you today. Nearly a decade ago, as Secretary of Transportation, I testified before this subcommittee and urged you to enact legislation to remove a federal restriction on the ability of airports to impose Passenger Facility Charges (PFCs) on air travelers who used those airports. With the strong leadership of this subcommittee, legislation was enacted to allow airports, on a limited basis, to impose passenger facility charges.
I have reviewed my testimony from nine years ago, and ( must report that what I told you then still rings true today. In fact, there are striking similarities between the situation I described then, and the needs we have today.
Then I told you that perhaps the single most important thing we can do to enhance airline competition is to develop capacity to encourage new entrants. A Passenger Facility Charge may well be the critical component in achieving such capacity growth." PFCs have been used to develop capacity and enhance competition. In Denver, they helped build a whole new airport, which has reduced delays at a major hub, with positive impacts rippling throughout the system. PFCs have helped fund runways in Grand Rapids, Michigan, Kansas City, Missouri, and Jackson, Mississippi, to name just a few.PFCs have enhanced competition by providing needed gates and related facilities that have been used by low-fare carriers at airports such as BaltimoreWashington, Providence, Oakland, St. Louis, Washington Dulles, and Tampa, resulting in better air service and lower ticket prices for air travelers. For example, at Washington Dulles, PFCs funded the new Midfield Terminal B, a 20-gate facility used by 10 carriers, including low fare carriers such as Metrojet and Delta Express. At St. Louis, PFCs funded gates for Southwest, and at Tampa, PFCs partially funded 15 gates, some of which were retained under the airport's control as common use gates, which means they will be available for new entrants. In comments recently filed with DOT, Wayne County, Michigan has indicated that it is entering into an agreement at Detroit with Southwest and Spirit Airlines to build 6 new gates for those carriers, with the costs to be reimbursed with PFCs. Spirit had previously been unable to obtain its own gates at the airport.
In 1990, I said, "Some in the industry have suggested that existing sources of revenues are adequate to finance future airport development needs. If that is so at a specific airport, then it would not elect to impose a fee." That too, has been borne out. Major airports in San Francisco, Houston, Honolulu, Charlotte/Douglas, and Pittsburgh do not impose PFCs. Other airports, such as Los Angeles and Memphis have imposed a fee at some point and have not at other times.
Interestingly, some of the larger airports, such as Chicago, Atlanta, and D/FW did not impose a PFC immediately; they waited until their capital development plans were more mature. Some smaller airports, such as San Antonio, Raleigh-Durham, Anchorage, Tucson, and Omaha do not impose a PFC. The wide variety in theimplementation of PFCs underscores the fact that voting to allow the PFC in 1990, or voting to remove the $3 PFC cap today, is not a vote to increase taxes. Rather, it is a vote to return control over decision-making to the local level. Where a PFC is needed, it will be imposed. Where it is not, it has not been imposed. That is a local decision.
An important feature of the PFC is that it may only be imposed to the extent that it is necessary to fund specifically identified and approved projects. When the allowable PFC costs for a project have been raised, the PFC may not continue to be imposed for that project. In this way, PFCs differ from bridge and tunnel tolls, where facility users may continue to be charged tolls long after the facility has been paid for many times over. Yet, unlike PFCs, there is no federal limit on the tolls that states or authorities may impose for bridges and tunnels.
In 1990, I pointed out that, since deregulation, 12 years earlier, enplanements were up 65 percent, and, coincidentally, they were forecast to increase by another 65 percent by the end of the century. Enplanements have risen by 200 million since 1990. Moreover, they are expected to rise from 640 million to over 1 billion within a decade, a growth rate of over 56% from an already elevated base. In 1998, approximately 618 million passengers were enplaned in the United States. The FAA projects that by 2002, that number will grow to 740 million and will approach 900 million enplanements sometime in 2005. Accommodating that level of activity would require the equivalent of the capacity that is handled today at-the top 30 U.S. airports combined. Put another way, we will have to build at our nation's airports, capacity equivalent to ten new D/FWs in order to accommodate this increased demand. That is a staggering prospect. And we have to find the funding for it.Federal funding alone will not be sufficient,, even with the budget reform which this committee is pushing and which we strongly support.
In 1990, I told you that there were 21 primary airports that each experienced more than 20,000 hours in annual flight delays, and that the number could grow to 39 airports by 1997 unless capacity was expanded. Thankfully, capacity has been expanded, through PFC-funded projects and other means, so that the number of severely congested airports has not risen dramatically.

Today 22 airports suffer more than 20,000 hours of annual delay. However, the FAA forecasts that unless major airport capacity investments are made, this number of severely congested airports will grow to 32 within 10 years.
In 1990, I suggested that there should be a minimum of federal restrictions on the locally-imposed PFC. I acknowledged that there was a federal role in prohibiting perceived deficiencies or abuses of PFCs in the past - where "people believed that localities were attempting to solve their local, non-aviation fiscal problems by extracting a fee from airline passengers as they passed through the airport." I stated that using PFCs for such purposes "is unfair, and allowing it would mean that the problem we seek to solve - airport congestion- would not be addressed."
In 1990, I said, the PFC" . . . is not a tax but must be a voluntary charge, with each locality in a position to decide whether or not to levy a PFC -and what projects to pursue. The power to use PFC financing must reside with those at the affected facility, because they will be accountable to their customers for imposing the charge. Congress will not." I also said "I emphasize that we simply propose to remove thefederal barrier to PFC's - not dictate that an airport use the authority unless and until it undertakes projects that will improve service for its travelers. This is a proconsumer proposal. The dollars that result will go directly to reducing delays at the facility where charged, and to opening competitive opportunities that will hold fares down."
As noted above, airports have only imposed PFCs when and where they had projects to improve service for travelers. As for the consumer benefits, I would like to illustrate the impact of PFCs with one example. BWI and Providence both used PFCs to build gates. Southwest Airlines moved into those gates at both airports and commenced service between Providence and BWI. DOT reports that, between the Second Quarter of 1996 (pre-Southwest service) and the Second Quarter of 1997 (post-Southwest service), the average one-way fare between Providence plummeted from $181 to $53. This was a decrease of $128, or 71% in the average one-way fare. The number of passengers increased by 884%. from about 14,500 passengers to about 142,300 passengers.
This is a dramatic illustration of the impact that a low fare carrier can have in a market utilizing PFC-funded facilities. At some airports, PFCs are the only funding tool within the airport's control to fund facilities for new entrants or expanding low fare carriers. It is absolutely vital that we allow for the introduction of service by low fare carriers-if we intend to maintain and expand competition in our national air transportation system.DOT has determined that, for domestic markets under 750 miles, there is no downward pressure on airfares unless a low fare competitor operates in the market. That is, if two, or three, or four large network carriers theoretically "compete" in a short-haul market, there is no difference in airfares from monopoly rates - the fare that would be charged if only one of them served the market. Only when a low fare carrier operates is there true competition in terms of impact on airfares. Thus, we must allow airports to ensure that low fare carriers can enter these markets - to begin operations at the airport and then expand their operations into other markets. Otherwise, we will see no impact on fares. In this light, it is easy to understand why dominant carriers do not want to see more PFC funds made available to allow more new entry.
Lifting the cap on PFCs and allowing for greater local control is thus a good way to promote competition without reregulating the airlines. Access to markets is necessary to ensure true competition, and facilities must be provided before carriers can enter those markets. As I said in 1990, "In 1978, we deregulated the industry. The removal of the ban on PFC's is, in a sense, another form of deregulation that will help address the growth from the first." Eliminating the PFC cap will continue the process of deregulating airport fee-setting and will allow airports to ensure that their markets remain open to promote airline competition, with its attendant reductions in airfares to benefit the traveling public.
Mr. Chairman, airports face astounding capital development needs to meet existing demand and the increasing future demand for air travel. Existing sources of funding are simply not sufficient to meet this demand, on a nationwide basis. At someindividual airports, there may be other ways to fund these needs, and they need not impose a PFC (as several prominent airports have not) or raise their existing PFC. But for the other airports which cannot meet critical needs without greater PFC revenues, the federal government should not restrict their ability to do so. As David noted in his testimony, airports provide economic benefits locally, regionally, and nationally. We all recognize those benefits, and we all agree that greater funding of airport needs is necessary. Eliminating the federal cap on PFCs will help promote capacity, safety, security, and competition and mitigate noise at airports. It will restore decisionmaking to the local level without compromising the federal interest in ensuring that PFC revenues are spent only on airport projects.
The reasons for lifting the PFC cap are just as compelling as the reasons for restoring PFC authority in 1990. Now, you have the benefit of observing airports' use of PFCs for 7 years. In 1990, you had to make a leap of faith, that you could craft a program that would ensure the proper use of PFCs. Your faith and your wisdom in crafting the program have been borne out. PFCs have been used in a variety of ways to the benefit of the traveling public. Now, it is time to take the next step and remove the cap. As I stated in 1990, I think it is best to impose "the barest minimum of Federal strings on the localities' options." If you eliminate the cap, the money will be well spent, for the benefit of the traveling public and our economy.
Mr. Chairman, that concludes my prepared statement. At this time my colleagues and I would be pleased to respond to any questions you might have.
END

LOAD-DATE: February 11, 1999