The capital needs of airports across the country are expected to grow significantly during the next five years, the Federal Aviation Administration warned in a report issued yesterday.

The National Plan of Integrated Airport Systems, a biennial report compiled by the FAA and presented to Congress this week, estimates there will be $49.7 billion of federal airport improvement grant-eligible infrastructure development over the next five years - an increase of 21% or $8.5 billion over the report issued two years ago. At the same time, funding for the airport improvement program has largely flattened out between about $3.5 billion and $3.9 billion in the past few years.

The primary purpose of the report is to help guide the FAA in determining how the AIP funds should be allocated.

The FAA decides which programs are eligible for AIP funding based on need rather than how much spending authority Congress will provide through appropriations bills, according to Charles Everett, manager of the FAA's national planning and environmental division.

The report is a snapshot of airport plans, limited to projects that the FAA has deemed eligible for AIP funds. The report does not encompass all capital plans for all commercial airports, but includes 3,356 existing and 55 proposed airports.

The steep rise in projected need for airport infrastructure in this year's report can be attributed in part to rising construction costs - up 6.5% in July compared with the same time last year, according to the American Association of Airport Executives. But of the projects included in the report, the FAA found 39% were for capital projects to support expected increases in travel. Capacity-related development takes the largest share of projects for large hub airports in the report.

Other factors such as airline service cuts and high fuel costs contribute to the overall finance picture for airports as well.

Everett said that despite the growing airport infrastructure requirements, the current financial crisis is hurting state and local governments' ability to bond-finance such projects.

"A lot of our airport sponsors are finding it's difficult to get credit or difficult to get bonding" because of uncertainty in the economy, Everett said.

Some operators, such as the Metropolitan Washington Airports Authority, have foregone bond issuance for airport projects and instead have chosen to pay for them with cash, Everett said.

Airport lobbyists believe that the report underscores the need for more AIP authorizations from Congress.

"We need more revenue to deal with these things," said Brad Van Dam, vice president of federal affairs for the American Association of Airport Executives Airport Legislative Alliance.

Three main sources of airport funding are AIP grants, passenger facilities charges, and bonds.

"If the current financial situation persists, that will force [airports] to rely on the other two sources" instead of bonds, Van Dam said.

The AAAE has been pushing for several policy changes to deal with the funding crunch such as reclassifying private-activity bonds for airport projects as public-purpose bonds, allowing advanced refunding for bonds as way to lower borrowing costs, and raising the current $4.50 cap on passenger facilities charges.

Under the AIP, the federal government provides grants to public agencies and in some cases private entities, to plan and develop airports for public use. Capital improvement and repair projects are eligible for AIP funding, as are the necessary planning, surveying, and design services for projects.

Grants from the AIP are sometimes used to back tax-exempt bonds, but more often to supplement other funding sources, such as bond proceeds.

The program draws from an airport and airway trust fund that relies on revenue from sources such as user fees and fuel taxes. States, the District of Columbia, and Puerto Rico were allocated a combined total of about $268 million in AIP funding during the fiscal year that ended Tuesday. AIP grants pays for about 75% of project costs for large and medium primary hub airports, and about 95% of eligible costs for smaller airports.

The FAA and AIP operate under a stopgap funding authorization that will expire at the end of March. Signed into law Tuesday night, the FAA extension includes $1.95 billion in AIP grants among other provisions.

The House approved a multi-year FAA bill last September, but Congress did not settle the differences between that bill and a version approved last summer by the Senate Commerce Committee and Finance Committee.

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