10.1

What are considered the two traditional revenue sources for airport development?

1.  Bond markets

2.  Various federal airport improvement programs

10.2

What are the five stages involved in the development of airport property?

1.  Determine permitted land-use

2.  Market analysis

3.  Pro-forma economic analysis

4.  Construction

5.  Operating plan

10.3

What four elements affect the development potential of airport property?

1.  Physical constraints

2.  Zoning regulations

3.  Political factors

4.  Restricted uses (e.g. conveyances)

10.4

To determine if a future demand exists for a piece of property, airport management should conduct what type of study?

Market analysis

10.5

True or False

Since deregulation in 1980, there has been a decreasing amount of financial instruments available to airports for funding capital development

FALSE

There has been an INCREASING number of instruments!

10.6

What are the three types of revenue bonds available for airport development?

1.  General obligation

2.  Revenue

3.  Hybrid

10.7

What types of bonds typically have lower interest rates and 10-15 year terms?

General obligation bonds

10.8

Why do general obligation bonds typically have lower interest rates than other types of bonds?

They have a community guarantee

10.9

What are the three advantages of issuing revenue bonds?

1.  Do not require voter approval

2.  Longer terms than general obligation bonds

3.  Airport sponsor is not "tied" to the bond rating of the municipality

10.10

What is an industrial development bond (IDB)?

A special type of revenue bonds

10.11

What are private activity bonds?

Bonds issues by a public agency which primarily benefit a private industry or activity.

10.12

What are the two IRS rules for a private activity bonds to be tax-exempt?

1.  Proceeds are used for proper facilities

2.  Financed facilities satisfy the public ownership requirements

3.  Must be directly related to the servicing of aircraft or transfer or passengers

10.13

True or False

Federal tax exemption on industrial development bonds can shave about 2% off the interest rate

TRUE

10.14

A hybrid bond is also known as what?

A double barreled bond

10.15

What is a hybrid bond?

A combination of PFC revenue and GARBs or GOBs

10.16

What are the two primary advanateges of hybrid bonds?

1.  The bond is backed from two different sources of revenue

2.  The taxing power of the issuer is not used

10.17

What are the three main indicators of investment quality used by potential investors?

1.  Bond ratings

2.  Interest costs

3.  Defaults

10.18

What is the purpose of a bond rating?

It helps to determine the risk of full and timely debt repayment

10.19

Who are the three main bond rating companies?

1.  Standard and Poors

2.  Fitch

3.  Moody's

10.20

Besides being in an easy to read format, what are the other three characteristics of the data an airport should provide to the bond rating companies?

1.  It should be TIMELY

2.  It should be RELIABLE

3.  It should be VALID

10.21

What are the eight pieces of information/data that an airport should provide to a bond investment company?

1.  Historical and projected enplanements

2.  Cargo tonnage

3.  Revenues and expenses

4.  Aircraft operations and service levels

5.  Feasibility studies on future capital development

6.  Economic base studies

7.  O+D studies

8.  Use and Lease Agreement

10.22

What are the five economic, legal, financial and operational factors that affect the quality of a rating analysis?

1. Earning assets of physical facilities

2.  Legal protections contained in use and lease agreements

3.  Pricing and rate making policies and procedures

4.  Effects of federal legislation

5.  Overall management performance

10.23

What was the financial importance of the Federal AirportAct of 1946?

1.  Created the Federal Aid to Airports Program (FAAP)

2.  Provided matching federal funds at a 50% level for development of airports in the National Airport Plan

10.24

What was the financial importance of the 1970 Airport and Airway Revenue Act?

Created the aviation trust fund which shifted the burden of airport development from tax payers to the users of the system

10.25

What was the purpose of the Aviation Trust Fund?

(2 items)

1.  Fully fund the R+D and capital development programs of the FAA including airport improvement grants

2. Fund the modernization of facilities and equipment for the ATC system

10.26

What was the importance of the 1970 Airport and Airway Development Act?

Created the Airport Development Aid Program (ADAP)

10.27

What was the importance of the 1982 Airport Improvement Program?

Replaced the ADAP and funds airport planning, development and noise compatibility projects

10.28

What are the five criteria for an airport to receive entitlement funding under AIP?

1.  Public-use airport

2.  Included in the NPIAS

3.  Project is included on an approved ALP

4.  Project is included on an approved TIP

5.  Project is included on an approved ACIP

10.29

What are the two types of funds available under the AIP?

Entitlement and Discretionary

10.30

Which of the two types of funds available under AIP is given to an airport through a formula based on the number of enplaned passengers?

Entitlement funds

10.31

Which of the two types of funds available under AIP is used to provide flexibility to meet important national airport system needs?

Discretionary funds

10.32

The FAA requires a B/CA for AIP projects greater than ______

$5 million

10.33

True or False

The AIP specifies funding levels for reliever, cargo, non-primary commercial, capacity enhancing projects, military airport program, noise abatement and safety and security projects.

TRUE

10.34

What are the four types of airports?

1.  General Aviation

2. Reliever

3. Non-primary commercial

4.  Primary commercial

10.35

Of the four types of airports, which airport is defined as having between 2,500 enplanements and 10,000 enplanements per year?

Non-primary commercial airports

10.36

Of the four types of airports, which airport is defined as having greater than 10,000 annual enplanements?

Primary commercial airports

10.37

Of the four types of airports, which airport is defined as having less than 2,500 annual enplanements?

General aviation airports

10.38

Of the four types of airports, which airport is typically located in an urban area and serves a larger commercial service airport that is at 60-percent or more of its available airfield capacity?

Reliever airports

10.39

What are the four requirements for an airport to be considered a reliever airport?

1.  Be near a commercial service airport that is using more than 60-percent of its available airfield capacity

2.  Have more than 50 based aircraft

3.  Have more than 25,000 itinerant operations per year

4.  Have more than 35,000 local operations per year

10.40

What are the two types of operations at an airport?

Local and Itinerant

10.41

Of the two types of operations, which one is defined as an operation that departs and returns to the same airport?

Local operation

10.42

Of the two types of operations, which one is defined as an operation that originates at one airport and terminates at another airport?

Itinerant operation

10.43

What is a Letter of Intent?

It is a document that conveys the FAA's intention to obligate future AIP funds to an airport over a multi-year period.

10.44

What is the primary advantage of a Letter of Intent?

It allows an airport to start construction on a project that may exceed any given year's entitlement funds

10.45

What four factors is the National Priority System based on?

1.  Purpose of the project

2.  Airport component affected

3.  Specific type of project

4.  Size and type of project

10.46

Of the four factors included in the National Priority System, which one is the most important?

The purpose of the project

10.47

What type of projects receive the highest funding priority in the ACIP?

Safety and security projects

10.48

What committee was created to assess the FAA's long-term financing needs and make recommendations on financing options to ensure stable and adequate funding sources?

National Civil Aviation Review Committee

10.49

What piece of federal legislation created the NCARC?

The 1996 FAA Reauthorization Act

10.50

What is the State Block Grant Program?

It is a program that allows 10 states to administer AIP grants for non-primary commercial service airports, reliever and general aviation airports.

10.51

What must occur for an FAA grant to be legally binding?

The official offer of federal funds must be signed by the airport manager/sponsor.

10.52

What four items does the FAA look for in any grant application?

1.  That the project is included in an approved Master Plan

2.  An environmental determination has been made

3.  There was an opportunity for a public hearing

4.  Includes DBE participation

10.53

What methods of payment can the FAA use when dispersing grant monies?

1.  Letter-of-credit

2.  Advance check

3.  Reimbursement check

10.54

How long do grant assurances remain in effect?

20 years

10.55

What two grant assurances never "sunset?"

1.  Prohibition on exclusive rights

2.  Prohibition on revenue diversion

10.56

Grant assurances attempted to balance which three competing needs?

1.  Need for the airport manager to manage local affairs

2.  FAA responsibility to ensure that federal funds are used effectively to meet public air transportation needs

3.  Goal of government to promot social objectives

10.57

What piece of federal legislation established the Passenger Facility Charge (PFC)

The Aviation Safety and Capacity and Expansion Act (ASCEA) of 1990

10.58

What is the maximum TOTAL PFC allowed under ASCEA?

$12 per passenger

10.59

Can PFCs be included in bankruptcy proceedings?

No.

10.60

If a primary commercial service airport enacted a PFC under the ASCEA, how much of its annual entitlements would it have to forego?

75%

10.61

How often does the airport have to generate an accounting report on PFC funded projects?

Quarterly

10.62

 Which piece of federal legislation increased the maximum PFC from $3.00 per segment to $4.50?

AIR 21

10.63

If a large or medium hub airport wanted to increase their PFC from $3.00 to $4.50, what must they do?

1.  Demonstrate that the project made a significant contribution to safety and security, increase competition, reduce congestion or reduce noise impact

2.  Forego 75% of their entitlement funding

10.64

The requirement under AIR 21 that large or medium hub airports increasing their PFCs to $4.50 had to reduce their entitlement funding by 75% reflects the thought that PFCs represented what?

A double taxation

(the first tax being the user fees that go into the aviation trust fund which funds the AIP)

10.65

 Under ASCEA, what five things can PFC funds be used for?

1.  Approved projects only

2.  Payment for all or part of allowable costs

3.  Airport's matching fund

4.  Augment of AIP funded projects

5.  Payment of debt service or financing costs of eligible airport development bonds

10.66

Under ASCEA, what must a project exhibit prior to being eligible for PFC funds?

They must preserve or enhance the SAFETY, CAPACITY, SECURITY and COMPTETIVENESS of the national airspace system

OR

Mitigate adverse noise impacts

10.67

What are the three risks that are associated with PFC backed bonds?

1.  FAA terminating the ability to collect for a violation of the PFC Act or ANCA

2.  Potential for airline bankruptcy or other supply side changes

3.  Airport may not implement the project within the specified number of years and authorization is revoked.

10.68

Prior to submitting a PFC application, what is required of the airport?

1.  Have an approved ALP on file

2.  Have an airspace and environmental study completed

10.69

True or False

A PFC Application can either request to impose a PFC or request to impose and use a PFC for a specific project

TRUE

10.70

What is the highest bond rating offered by Moody's?

Aaa

10.71 

What is the minimum bond rating for an investment grade bond for Moody's?

Baa

10.72

Both Fitch and Standard and Poor give a prime rating the score of what?

AAA

10.73

Both Fitch and Standard and Poor's lowest investment grade rating is what?

BBB

10.74

What is a rate covenant?

A pledge by the airport to impose fees and charges to pay all costs of operation, maintenance and debt service and all reserve funds at their required levels.

10.75

What three characteristics define a rural airport?

1.  Greater than 75 miles from an airport with 100,000 enplanements

2. Have less than 100,000 enplanements

3.  Serviced by an air carrier receiving subsidies

10.76

The O'Hare agreements concluded what?

That airlines can back revenue bonds

10.77

True or False

The trend over the last 10 years has been towards more general obligation bonds

FALSE

It has been towards more revenue bonds and less general obligation bonds

10.78

What is a limited tax bond?

It is when the taxing power of a governmental issuance in support of municipal securities is limited by state constitution or statutes.

10.79

For what three reasons were G.O. bonds used in the early days of aviation?

1.  The industry was viewed as risky due to a lack of history

2.  Many communities were using aviation as a "drawing card" for industry

3.  They provided a less costly approach to development

10.80

True or False

The Aviation Trust Funds was set up to be wholly self-financed by the users and was to become a dedicated revenue source for investing and infrastructure captial improvements

TRUE

10.81

What are the seven categories of planning and development activities in the ACIP?

1.  Special programs

2.  Reconstruction

3.  Standards

4.  Upgrade

5.  Capacity

6.  New airports (capacity driven)

7.  New airports (community driven)

10.82

What happens to any unspent PFC revenue that is not reported to the FAA?

The FAA can reduce future entitlement funds by a like amount

10.83

What are the two more important factors that credit analysts consider in analyzing stand-along PFC backed bonds?

1.  Ability of airport management to successfully manage capital projects

2.  Airport's enplanement history

10.84

What does the Davis-Bacon Act require of contractors?

That employers on federal contracts pay wages that are at or above the level determined by the Department of Labor to be prevalent inthe geographic area.

10.85

What does the Contract Work Hours and Safety Standards Act (CWHSSA) require?

The payment of overtime above 40 hours at 1.5 times the hourly rate