DALLAS – Raising the passenger facility charge that supports airport bonds for infrastructure projects is the "only option left" for airports scrambling to accommodate increases in air traffic, the director of the St. Louis airport told lawmakers on a Senate panel.
The PFC cap of $4.50 per trip segment levied by individual airports to back bonds that finance terminals and other surface infrastructure has lost 50% of its purchasing power to inflation since its last increase in 2000, said Rhonda Hamm-Niebruegge, executive director of Lambert-St. Louis International Airport.
An increase in the cap would restore PFCs lost purchasing power while also allowing local officials to meet local needs with no impact on the federal budget, she said Thursday at a hearing held by the Senate Commerce, Science and Transportation Committee's aviation panel. "Now is the time to listen to our concerns," Hamm-Niebruegge said. "We cannot pull more tricks out of the hat. The challenges are simply too big. We need this PFC increase as it truly is the only option left."
Airports have relied on tax-exempt bonds supported by the PFC, which is included in airline ticket prices, and other revenue to finance billions of dollars of improvements, Hamm-Niebruegge said.
"Many of us are concerned with proposals being discussed on Capitol Hill to eliminate an important financing tool relied by airports: tax-free municipal bonds," she said. "Considering the infrastructure needs airports and cities alike are facing, the last thing we need is the loss of tax-free municipal bonds, which in many cases are the funding mechanism of last resort."
The St. Louis airport devotes most of its PFC revenue to reducing the $554 million of debt it incurred in building a much-needed parallel runway, Hamm-Niebruegge said.
"An increase in the PFC cap could not only be used to fund projects that have been deferred due to a lack of funding, but would provide a substantial opportunity to pay down existing debt sooner," she said, adding, "Reducing our current debt is extremely important as we try to grow back the connecting traffic that we lost in recent years."
Airport revenue from the PFC totaled $3.1 billion in fiscal 2016 and that is expected to rise to $3.2 billion in 2017, according to the Federal Aviation Administration. The maximum fee of $4.50 per trip segment is levied by 29 of the 30 large U.S. hub airports and 28 of the 29 medium-sized airports.
Airlines collected $3.15 billion in baggage fees during the first three quarters of 2016, the FAA said in December.
An increase in the PFC is not needed because airports have several options for financing surface infrastructure projects, said Bob Montgomery, Southwest Airlines Co.'s vice president for airport affairs.
"There is simply no good justification to raise our customer's tax and fee burden," Montgomery said. "We object to raising the passenger facility charge above the current cap."
Southwest's average airfare has decreased by 8% over the past two years but passenger taxes continue to grow relative to ticket prices, he said.
"I have never seen an airport with a construction need that has not been addressed due to the lack of funding," he said. "Simply put, if there's a capital need, together with the airport, we can and will find a way to fund it."
Lawmakers need to make a distinction between airport capital needs and what airports want, Montgomery said.
"Never ask a barber if you need a haircut," he said.
The Rebuilding America's Airport Infrastructure Act (H.R. 1265) filed in early March by Rep. Peter DeFazio, D-Ore., and Rep. Thomas Massie, R-Ky., would lift the current PFC cap in exchange for reducing the FAA's airport improvement grant program.
