Category Archives: Legal Affairs

FAA Shutdown Impact: Peoria International Airport

Gene N. Olson
Director of Airports

The Furlough…How did it play in Peoria? Pretty poorly!  The recent FAA shutdown places new emphasis on the need for stable funding for the FAA over a multi-year period.  Only with stable funding can disruptions be avoided and planning be accomplished for the capital development of our nation’s air transportation system, from the major hubs right down to the regional airports.

Peoria felt the impact of the shutdown even before it happened.  When the political climate a week before the shutdown looked like a deal would not be reached in time, the first casualty Peoria felt was an interruption of a site selection study for a new air traffic control tower.  Peoria just opened a new terminal building in April, and the old terminal stands in the way of full use of the new building.  The old terminal houses the air traffic control tower, and the building is 52 years old and in bad shape.  We can’t fully demolish the old building until a new tower is constructed.  The old building is costing the airport authority money, with an estimated one third of the airport’s total electrical usage still consumed by the mostly vacated old terminal.

The site selection process for developing a new tower is a three step process.  This process is conducted at the Airways Facilities Tower Integration Lab (AFTIL) at the FAA Tech Center in Atlantic City, NJ.  The first step is a week-long visit to the AFTIL, using a digital model of the airport to select three or four potential sites (we looked at fourteen and narrowed it to four).  The second step is an analysis by FAA engineers of the feasible sites, which can take about 6 months, and then determine the estimated cost at each site.  The final step is a second visit to the AFTIL, which for Peoria was scheduled to take place July 25 – 29.  This visit was cancelled the week prior to the shutdown, because it looked certain that the AFTIL staff would be furloughed.  The estimate at the time of cancellation was that rescheduling would probably not be possible before September.

The FAA shutdown also impacted the Airport Authority’s project to partially demolish the old terminal and renovate the HVAC systems still supporting the FAA tower operation.  We had hoped to take bids to do this work on September 1, after review by FAA staffers in late July or early August.  The furlough has pushed this back to the end of August, because there was no one working at the FAA to review the plans.  This has pushed back our ability to start the project until October, which means that the HVAC renovations will take place during the heating season instead of during milder weather.

An additional impact was felt on PIA’s planned project to rehabilitate the approach ends of Runways 13 and 4, scheduled for FY 2011.  Due to the furlough, no FAA employees were at work in the Chicago Airports District Office to process grant paperwork or to issue new grants.  The impact of the shutdown on this project has put finances in question and will likely delay the start of construction until next year.

Even projects that were not funded by FAA were impacted by the shutdown.  The Air National Guard has had a presence on the Peoria International Airport since just after World War II.  One older portion of the old base had an area contaminated with petroleum products and the ANG has funded a project to remove contaminated soil and replace it with clean fill.  Just before the shutdown, the Guard contacted the Airport Authority about a new, more efficient way to bring trucks on and off the site.  This new routing was not in the original plans and might require a new airspace determination from the ADO.  Since there was no one at work to ask the question, the contractor has had to delay the start of earthmoving.  This delay may push the project into next year, with uncertain consequences.

Even a shutdown of only two weeks has had a very significant negative impact on the Peoria International Airport, costing us significant local dollars that won’t be replaced by any grants.  My hat is off to Secretary of Transportation Ray LaHood for his constant drumbeat of support for getting Congress to extend the FAA’s authorization, and his support of long term FAA funding.  Only with stability and assured multi-year funding mechanisms will our industry be able to resume planning for capital development programs and financing.

FAA Shutdown Impact: Pittsburgh International Airport

By Brad Penrod

Brad Penrod, Executive Director/CEO

The impact on PIT of the FAA shutdown was the postponement of the rehabilitation of RWY 10C-28C that was estimated at $8.4 million.  This project, which included improvements and suggestions from many sectors of the aviation community, FAA, flight crews, Airport Authority Maintenance, Engineering and Operations professionals, was agreed by all, including the airlines, to be the critical project for the year.

For an $8.4 million project, estimated to last six months, and assuming an “average” salary of all direct and indirect labor involved, including all overhead and benefits of $80K or $40K for 6 months, means $8.4MM / $40K = 210 jobs or  approximately 100 direct jobs and 100 indirect jobs were potentially impacted by the delay or possible cancellation of the project.

At the Allegheny County Airport, there is a significant corporate tenant that was scheduled to start a multi-million dollar renovation to their hangar, which has some historic significance to the airport.  The FAA had received the required documentation requesting the work be approved, but due to the shutdown the FAA review was unable to proceed as planned, thus costing delays and the loss of approximately 50 construction jobs.

We would be so happy to have the freedom to run the business of airports like business, along with the required funding that is reviewed on an annual basis with the carriers.  Maybe our Canadian friends have it right!

Oh well, I guess we can always issue new debt…

 

U.S. Airport Financing Policy is Broken

Read  ACI-NA President Greg Principato’s opinion piece in Aviation Week.

ACI-NA President Greg Principato

Thank goodness the FAA shutdown is over (for now).  This self-inflicted wound put more than 74,000 people out of work; delayed needed airport infrastructure and safety projects, some until next year’s construction season; and pushed NextGen further into Never NeverGen land.  During the shutdown I often recalled a line I penned for the 1993 report of the National Commission to Ensure a Strong Competitive Airline Industry, that aviation is the only industry whose day-to-day efficiency is capped by the day-to-day efficiency of the federal government.  This reality has never been clearer than it is right now.

The shutdown was the culmination of four years of temporary extensions during which the Airport Improvement Program lurched forward in spurts leaving the FAA unable to release needed grant money in a timely way, resulting in delayed and cancelled projects.  Add to that the impact of the financial crisis on the market for airport bonds, the expiration of the AMT waiver for public purpose bonds and now the U.S.  government’s credit downgrade which is likely to raise borrowing costs for airports.  The federal government’s…ahem…inefficiency, means that investment in aviation infrastructure in this country is being impeded, even reduced.  This at a time when our competitors around the world are moving in the opposite direction.

And all because the nation’s airports operate under an onerous, Nixon-era, regulatory framework dominated by federal influence.  The financial regulatory framework under which airports operate dates from the days when the federal government told the airlines where to fly and how much to charge, and   when someone actually thought wage and price controls were a good idea.   The events of these past couple of weeks demonstrate just how stupid that is.

It would be funny if it wasn’t so sad.  In their “Falling Apart and Falling Behind” report, Building America’s Future noted that The World Economic Forum ranks U.S. air transport infrastructure 32nd in the world, behind countries like Panama, Chile, and Malaysia.

Liberals in our country argue for more investment in infrastructure.  Tea Party conservatives argue for less interference from Washington in our economic lives.  The way airports must operate satisfies neither, we have declining investment and way too much federal involvement.  But we have a solution that can satisfy both – get the federal government out of the business of limiting how airports can raise and spend resources to meet their needs.  The federal government tells airports they can charge only a limited user fee and limits how it can be spent.  Yet, this is the very mechanism used around much of the world.  The current system makes airports of all sizes too dependent on federal funds, which are raised by the very ticket tax that temporarily expired when the FAA shut down.  Give airports the option to determine their own user fee, and how to use those funds.  Market forces will ensure the fee is sustainable; no community will want to charge a fee so high it will lose air service.  By doing so, we can take another look at the current tax and grant program and make adjustments to both.

If we do this, we will remove federal domination of airport finance and infrastructure investment, assuring more local control.  We can promote additional, needed improvements in infrastructure and keep our edge in this increasingly global industry.  We can reduce federal spending and taxes, better focusing both on critical needs going forward such as truly building a next generation ATC system, and providing resources in smaller communities that may continue to need assistance.

This type of system would benefit our country, our economy, passengers and, I would argue, the airlines.  In fact, that is why airlines around the world have argued for such an approach; U.S. carriers are the last holdouts.  The FAA shutdown should provide all the evidence we need that we cannot continue to shackle airports’ ability to finance needed projects.  Anyone who cannot see that probably can’t see the “E” at the top of an eye chart.  Or maybe doesn’t want to open their eyes to reality.

 

FAA Shutdown Impact: LAX

By Gina Marie Lindsey

Gina Marie Lindsey, Executive Director, Los Angeles World Airports

When I spoke at a luncheon of the Aero Club of Washington two weeks ago, I spoke about the great work we’re doing to improve LAX, as well as the looming failure of our nation’s system for funding aviation infrastructure.  Three days later, Congress underlined my woeful prediction by failing to take care of the simplest of needs, failing to take an action that it managed to do twenty times since 2007 and failing to pass an extension of FAA authorization.

I would like to applaud Senator Barbara Boxer for being a champion for airports on the Senate floor and asking her colleagues to do what was simple and necessary – approving a clean extension of the FAA authorization bill.  I’d also like to thank the Senator for hosting a conference call last week with a large number of aviation stakeholders to learn how this impacts the nation on many levels.  Federal employees were not working, contractors were shut down, and revenues for aviation infrastructure were being waived off to the tune of $200 million per week.

In Los Angeles, construction work proceeded as planned, but the shutdown presented challenges for the airport.  Key FAA employees were furloughed, and we were not able to get resolution of certain regulatory, engineering, and planning issues that were confronting our construction crews.  As the shutdown continued, the situation grew more problematic.  It could have delayed our starting key runway lighting and taxiway projects that are essential safety elements of our construction program.

And it’s not just airport projects that were impacted.  The Los Angeles County Metropolitan Transportation Authority (Metro) is in the final stages of designing its light rail Crenshaw Line.  Because the Crenshaw line crosses the ILS glide slope just outside the airport boundary, Metro has been working with FAA engineers to agree on a design and specifications that will allow Metro to build a light rail line that complies with FAA’s safety requirements.  FAA staff furloughs brought these discussions to a standstill at a key point in Metro’s design process, and this public transit project risked falling off schedule.

While the Senate has now just passed the House extension, it’s clear we will be facing the same seemingly intractable political tensions in mid-September, when the newly passed extension expires…again.  This is the time for airports, airlines, manufacturers and labor interests to collectively craft a new funding structure that is predictable, sustainable and minimizes continued vulnerability to politicizing the core stability of this industry.

 

ACI-NA Joins Coalition Opposing 3% Withholding

By Jane Calderwood
ACI-NA has joined the Government Withholding Relief Coalition which is seeking the repeal of Section 511 of the Tax Increase Prevention Reconciliation Act of 2005 also referred to as ‘3 percent withholding.’  The provision originally required that beginning Jan. 1,  federal, state and local governments spending more than $100 million per year on purchases of goods and services must withhold 3 percent from all payments to contractors and vendors and remit those funds to the IRS to be applied toward the contractors’ and vendors’ federal income tax liabilities. The American Recovery and Reinvestment Act postponed the start date for the provision to Jan. 1, 2012.  Recently the Internal Revenue Service announced they were delaying implementation of this provision until Jan. 1, 2013, but legal questions remain as to whether or not the IRS has the authority to take this action.

The 3 percent withholding provision will require changes in federal regulations as well as state, city, county and municipal regulations, and businesses will need to create new accounting and compliance requirements.  The Coalition has estimated that the compliance costs will be between $75 billion and $15 billion depending on the outcome of the IRS’ implementing regulations.

The House Small Business Subcommittee on Contracting and Workforce is holding a hearing on the subject on this coming on May 26, and ACI-NA is submitting testimony in support of the repeal of this onerous provision.