The debate continues over whether or not the American Recovery and Reinvestment Act (the stimulus) has been a success. I can’t speak for the bill’s overall record, but when it comes to airports, my response is an emphatic ‘yes’.
The stimulus included three provisions that specifically benefitted airports – $1.1 billion for infrastructure; an exemption of the Alternative Minimum Tax (AMT) on all interest earned on private activity bonds and refinancing of those bonds issued between 2004 and the end of 2008; and $1 billion to the Department of Homeland Security for accelerated procurement of checked baggage screening and checkpoint equipment at airports.
When John Clark, ACI-NA’s chairman, testified before the House Transportation and Infrastructure Committee in January, he noted that the key to assuring a successful stimulus was to get the funds flowing immediately, so he recommended using the existing Airport Improvement Program (AIP) for airports.
Airports operate on a continuous planning cycle and typically have capital programmes planned five to 10 years in advance. Many of these projects have already completed the necessary planning, design, environmental and other reviews, including the FAA’s – thus meeting the committee’s criteria of being ‘shovel ready’.
And this approach clearly worked, as by the beginning of July, the FAA had authorised 99% of the $1.1 billion for 278 grants, allowing airports across the US to put people to work while making much needed infrastructure improvements.
At the Detroit Metropolitan Wayne County Airport, for example, $15 million in stimulus funding was added as part of a $34.6 million rehabilitation project. The funding was estimated to generate up to 225 new, local jobs at the airport for excavators, pavers, hauliers, electricians and other construction workers. And the newly rebuilt runway has a lifespan of at least 20 years, an important investment at one of the 20 busiest air transportation hubs in the world.
At the Allegheny County Airport, a general aviation airport serving as a reliever for Pittsburgh International, the $2 million in stimulus funding was used to renovate parts of four taxiways and reconfigure aircraft apron areas that will allow for the future construction of aircraft maintenance hangars and their associated ramp space.
The reconfiguration associated with this project provides the infrastructure that is so critical for future aviation industry demands, while correcting an antiquated physical layout. It also provides space for the construction of much needed aircraft maintenance hangar facilities. Thus, the $2 million not only created 40 jobs, but also positioned the airport to allow construction jobs associated with new hangars and the long-term creation of aircraft maintenance and operations positions as well.
Since the bill’s passage, a number of airports have been able to take advantage of the AMT holiday by issuing bonds. Prior to the exemption, the AMT penalty caused airport bonds to be unattractive on the markets, with no 30-year airport bonds being sold from August to December 2008. With the exemption, airports have had great success not only in finding buyers for the bonds (more than $3 billion sold), but many have also saved debt servicing costs due to the lower interest rate demand brought about by the exemption.
Metropolitan Nashville Airport Authority sold $36 million in bonds to help fund a terminal project; Miami Dade has sold bonds for its new terminal, and the Metropolitan Washington Airports Authority was able to sell bonds to assist in its capital construction programme.
In addition, at McCarran in Las Vegas, they placed $550 million of bonds using the AMT holiday. This funding was essential to the ongoing $2.5 billion Terminal 3 construction project. Without this funding, the project would have been closed down and 1,600 jobs would have been lost. The project is planned to continue through calendar year 2011, peaking at 2,400 jobs, which would not have been maintained without this stimulus action.
In mid-August, the Cleveland Airport System, Dallas/Fort Worth International Airport and Denver International Airport all announced their intention to sell bonds, taking advantage of the AMT exemption.
The airport infrastructure and security equipment funding, as well as AMT relief, are success stories. Despite recent concerns expressed by the DOT Office of the Inspector General about six of the 263 grants (2.3% of funds) issued by FAA as of August 3, it is clear that these programmes have helped airports throughout the United States.
No-one can argue what we, in the industry, have always known: airports are economic drivers that serve as catalysts for development not only in their respective communities, but for the country as well. In this economic climate, everyone benefits.
Airport World 2009 - Issue 5