Impact of Regulatory Compliance Costs on Small Airports (2013)

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1 S U M M A R Y Over time, federal, state, and local governments have gradually increased the compliance requirements for U.S. airports. The costs associated with incorporating ongoing regulations in a wide array of subject areas have steadily added to airport operating costs. These costs are a growing concern for small hub and non-hub airports that have limited staff and financial resources. For many small airports, low levels of passenger enplanements and/or operations limit their ability to raise revenue or cut costs significantly to make up for the financial requirements of increased regulation. With budgets already stretched by operating costs and capital expenditures, many small airports struggle to absorb compliance costs. While government agencies provide some funding for new regulatory initiatives, most compliance costs remain the responsibility of the airport. The two objectives of this research study were (1) to identify the compliance requirements applicable to small hub and non-hub airports during the period from 2000 to 2010 (study period) and (2) to quantify the costs, including initial costs and recurring costs, of federal requirements on small airports. Additionally, the study identifies potential funding sources and investigates actual use of these sources by small airports to cover the costs of compliance. For purposes of this study, a small airport means a small hub or non-hub primary airport as defined by the Federal Aviation Administration (FAA) under the Airport Improvement Program (AIP). The terms “action” or “requirement” are used interchangeably throughout this report, referring to the rules, regulations, orders, advisory circulars, mandates, and other compliance provisions issued during the study period. The term “regulatory compliance” refers not only to compliance with requirements imposed by rules or regulations, but also to compliance with the other actions listed above. The research focused on requirements adopted during the study period in the following areas: • FAA and U.S. Department of Transportation (DOT) requirements • U.S. Environmental Protection Agency (EPA) and other federal environmental requirements • FAA and Transportation Security Administration (TSA) security requirements • Occupational safety and health requirements To identify compliance requirements initiated during the study period, the research team relied primarily on federal agency resources, including agency websites, published regula- tory documents, and agency staff. Many security requirements are considered to be security- sensitive information (SSI) and are not available for public disclosure. Therefore, the research team, in part, relied on the experience of individual researchers and industry experts. Multiple approaches were used to determine compliance costs for the identified actions. Estimates of costs were obtained from agency documents (e.g., cost impact assessments, Impact of Regulatory Compliance Costs on Small Airports

2economic evaluations) to the extent they were available. The research team also conducted an extensive two-phase survey. Phase 1 focused on determining whether airports were affected by particular compliance requirements. Phase 2 focused on identifying costs incurred by survey participants to meet the requirements. The survey was supplemented by telephone interviews with select respondents and case studies of five (three non-hub and two small hub) airports to obtain a detailed understanding of the cost impact of actions. Findings Scope of Compliance Requirements There was substantial compliance activity during the study period. A total of 291 fed- eral actions were adopted (see Table ES-1). Put another way, during the study period, the agencies initiated new requirements at a rate equivalent to one new compliance mea- sure every 2 weeks. Most of the compliance activity was associated with the FAA/DOT requirements and with security requirements. FAA/DOT requirements account for more than one-half of the total and security requirements account for more than one-quarter of the total. Many of these new requirements add continuing costs on airports by specifying periodic updates, inspections, monitoring, and controls. FAA Requirements FAA requirements take many forms in addition to regulations, which are directly bind- ing on airports. Other compliance documents include advisory circulars (ACs), agency orders, certification alerts (CertAlerts), program guidance letters (PGLs), and passenger facility charge (PFC) updates, which become binding on airports through various indi- rect methods. For example, an FAA order includes direction to FAA staff on administer- ing the program covered by the order. Airports become subject to the direction in the order through the FAA’s administration of the program. PGLs and PFC updates function in a similar manner to FAA orders. Some ACs are incorporated by reference into AIP grant agreements and become binding when a grant agreement is executed. Other ACs are defined as one (and sometimes the only) means of complying with Code of Federal Regulations (CFR) Title 14 Part 139 regulations. During the study period, the FAA adopted a total of 140 compliance actions/documents with the following breakdown by type: • Regulations—6 • Orders—8 • ACs—86 • CertAlerts—20 Compliance Area Compliance Action Count FAA/DOT 150 EPA and other environmental 39 Security (FAA and TSA) 81 Occupational safety and health 21 Total 291 Table ES-1. Number of compliance actions adopted, 2000 to 2010.

3 • PGLs—10 • PFC updates—7 • Other—3 The requirements fall broadly into the following categories: • Part 139 airport certification requirements • Airport safety, standards, and design • Airport operations • AIP administration • PFC administration • Airport grant assurance compliance Security requirements adopted by the FAA during the study period are discussed in the Security Requirements section below. DOT Requirements During the study period, the DOT adopted 10 requirements applicable to small airports. Nine were in the form of regulations or amendments to regulations. Generally, the DOT requirements apply to airports as recipients of federal grants. Some of the requirements apply to all DOT-administered financial assistance programs, and some apply government-wide. Three of the 10 requirements are unique to airports. Environmental Requirements There were a total of 39 regulatory and compliance actions that affect small airports. Of these actions, the EPA issued 28, the DOT issued three, the FAA issued seven, and the Office of the President issued one in the form of an Executive Order. Most federal environmental requirements are located in CFR Title 40, administered under the authority of the EPA or delegated to state agencies. Environmental requirements were also identified under CFR Titles 10 (Energy), 14 (Aviation), and 49 (Transportation). The environmental actions generally fall under one of the following regulatory topics: • Air quality • Emergency planning and response • Noise • Planning and development • Sensitive areas and wildlife • Waste management • Water resources Of these topics, the following categories were reported as the most costly: • Aboveground storage tank operations and spill prevention, control, and countermeasure (SPCC)-related costs • Preparation of National Environmental Policy Act (NEPA) documents • Land acquisition and noise • Construction stormwater pollution prevention plans • Drinking water supplier operations

4Security Requirements The nature, scope, and responsibility for airport security requirements were dramatically affected by the events in the United States on September 11, 2001 (9/11). Regulation of civil aviation security transferred from the FAA to the TSA. The TSA took over passenger and bag- gage screening operations from contractors employed by airlines. During the study period, federal agencies adopted a total of 81 security requirements. Twenty-one were adopted by the FAA; 58 were adopted by the TSA; one was adopted jointly by FAA and TSA; and one was adopted by Customs and Border Protection (CBP). Most of the FAA and TSA security requirements were adopted to improve aviation security in response to the events of 9/11. Prior to the events of 9/11, airports were required to maintain airport security programs (ASPs). ASPs were subject to frequent mandatory amendments issued by the FAA, referred to as emergency amendments. After it assumed jurisdiction over aviation security, the TSA renamed these amendments security directives. Two of the requirements were regulatory actions published in the Federal Register; 77 were emergency amendments or security directives; one was an amendment to airport security plan requirements; and the CBP document was a guidance document on airport technical design standards. The emergency amendments, security directives, and airport security plan requirement contain SSI and public disclosure is prohibited. Therefore, this report cannot provide specific information on the contents of the emergency amendments, security directives, and airport security plan requirements. Rather, the findings related to TSA compliance requirements are discussed in the broad context of the overall cost effect on airports. Occupational Safety and Health Requirements The small hub and non-hub primary airports included in this study are publicly owned and therefore not subject to the direct jurisdiction of the Occupational Safety and Health Administration (OSHA). Depending on the approach to occupational safety and health regulation adopted by its state, an airport may be subject to state regulation or governed by a voluntary program. OSHA requirements adopted during the study period may be relevant, to the extent they are incorporated in state programs or airports’ voluntary programs. In addition, private contractors and tenants would be subject to OSHA regulation, unless they are covered by a qualifying state plan. Twenty-one OSHA regulatory or compliance actions with potential impacts on air- ports were adopted during the study period. Fourteen were regulatory; one was a com- pliance directive; two were revisions to voluntary programs; and the remaining actions were guidance documents. Cost of Compliance Compliance results in costs on individual airports, which can be substantial for the industry as a whole. The research investigated costs on individual airports and, based on the sample of survey respondents, estimated national costs for individual regulatory areas. Estimates of national costs consider that a regulatory compliance requirement creates a cost for an airport only if it applies to that airport. Otherwise, the airport does not incur the cost. Estimates of compliance costs are based primarily on survey data. Published agency esti- mates of cost impact were limited and often deviated substantially from airports’ reported experience. Most often, airports’ reported costs exceeded published agency estimates.

5 Most Costly Requirements for the Small Airport Industry Table ES-2 presents the 20 federal requirements with the highest initial industry costs for small airports. Table ES-3 presents the 20 federal requirements with the highest recurring industry costs. For each requirement, cost is calculated by multiplying the per-airport cost determined from the Phase 2 survey results by the number of affected airports. The number of affected airports is derived from the percentage of airports affected by the requirement determined from the Phase 1 results multiplied by the small airport population. Table ES-3 may understate the overall impact of recurring costs. In particular, because recurring requirements are mostly operational and administrative, they are often satisfied using existing staff resources. Costs of this type could not be easily isolated and quantified. They can be substantial, such as TSA compliance costs, as the telephone interviews and case studies revealed. For most requirements, the average cost per airport masks a wide range of reported results. The research included correlation analysis of reported costs with two measures of activity— enplanements and commercial operations. Quantitative analysis ruled out correlation with activity measures for all but a few requirements. For those few requirements that showed sta- tistical correlation, qualitative evaluation ruled out correlation. Compliance costs do not vary with the level of activity. The level of enplanements or commercial operations cannot be used Rank Requirement Compliance Category Industry Initial Costs 1 Runway Safety Area Requirements FAA $695,166,000 2 Any Other Equipment or Systems Related to Access Control Security $265,608,000 3 Security Fencing Requirements FAA $146,982,000 4 Wildlife Hazard Fencing Requirements FAA $138,296,000 5 Physical Access System Security $130,122,000 6 Part 139 Aircraft Rescue & Firefighting (ARFF) Requirements, Existing Certificate Holders FAA $106,026,000 7 Vehicle Operations in Aircraft Operations Area, Enforcement and Control FAA $101,835,000 8 Enhanced Checked Baggage Screening Security $68,028,000 9 Runway Protection Zone Requirements FAA $60,150,000 10 Enhanced Passenger Screening Security $54,101,000 11 Closed Circuit TV (CCTV) Monitoring System Security $51,639,000 12 Environmental Assessments (NEPA) Environmental $32,535,000 13 Consultant Selection Requirements for AIP-Funded Projects FAA $29,295,000 14 Requirements for Use of Geospatial Information System (GIS) Techniques FAA $28,371,000 15 Part 139 Fencing Requirements, Existing Certificate Holders FAA $26,608,000 16 Airport Industrial Waste Requirements Environmental $25,686,000 17 Airfield Sign Requirements FAA $22,042,000 18 Perimeter Security Systems or Equipment Security $16,781,000 19 Aboveground Storage Tank Requirements Environmental $15,810,000 20 Construction Notice of Intent Requirements Environmental $12,094,000 Table ES-2. Federal requirements with the highest initial costs for the small airport industry.

6to predict the cost of a particular requirement. The results in the two tables were therefore calculated using per-airport average costs, rather than unit costs based on activity levels. Tables ES-2 and ES-3 show the total cost of compliance requirements, without subtracting non-airport funding (primarily federal). The Funding Compliance Costs section presents estimates of non-airport funding and net costs to the airport industry. Total Industry Cost of Federal Requirements The cost of a particular requirement on the small airport industry as a whole depends on the number of affected airports. The Phase 1 survey provided data on the percentage of air- ports affected by particular requirements. The Phase 1 data, combined with per-airport cost data from Phase 2, permitted an order-of-magnitude estimation of industry costs for small airports. Table ES-4 presents total compliance costs for the four compliance categories. Total costs are almost $2.2 billion. Costs presented in the table are total costs without adjustment Rank Requirement Compliance Category Industry Recurring Costs 1 Vehicle Operations in Aircraft Operations Area, Enforcement and Control FAA $29,191,000 2 Vehicle Operations in Aircraft Operations Area, Emergency Operations FAA $12,229,000 3 Requirements for Use of Geospatial Information System (GIS) Techniques FAA $5,642,000 4 Part 139 Aircraft Rescue & Firefighting (ARFF) Requirements, Newly Certificated Airports FAA $3,278,000 5 Vehicle Operations in Aircraft Operations Area, Vehicle Access FAA $3,040,000 6 Vehicle Operations in Aircraft Operations Area, Vehicle Inspection and Marking FAA $3,013,000 7 Mobile Refueler, Material and Equipment Replacement Environmental $2,635,000 8 Part 139 ARFF Requirements, Existing Certificate Holders FAA $2,558,000 9 Requirements for Airfield Signs FAA $2,449,000 10 Aboveground Storage Tanks, Material and Equipment Replacement Environmental $2,108,000 11 Disadvantaged Business Enterprise (DBE) Requirements for AIP-Funded Projects DOT $1,773,000 12 Occupational Health & Safety Training Occupational Safety and Health $1,218,000 13 Wildlife Hazard Fencing Requirements FAA $1,166,000 14 Pesticide Applicators, Material and Equipment Replacement Environmental $1,116,000 15 Personal Protective Clothing, Annual Cost Occupational Safety and Health $971,000 16 Vehicle Operations in Aircraft Operations Area, Driver Training Curriculum FAA $867,000 17 Airport Industrial Waste Requirements Environmental $670,000 18 Perimeter Fencing for Part 139, Existing Certificate Holders FAA $516,000 19 Modified ARFF Training Requirements FAA $401,000 20 DBE Requirements for Airport Concessions DOT $396,000 Table ES-3. Federal requirements with the highest recurring costs for the small airport industry.

7 for non-airport contributions. Non-airport contributions refer to federal and state grants and other third-party funding. PFC revenue is considered to be a form of airport funding. Most Costly Requirements per Airport Tables ES-5 and ES-6 summarize the 20 federal requirements identified through the research with the highest initial compliance costs per airport and highest recurring costs Compliance Category Total Cost ($ Millions)1 FAA/DOT $1,459.5 Security $610.8 Environmental $90.2 Occupational Safety and Health $11.7 Total Compliance Costs $2,172.2 1 Includes initial and recurring costs where applicable Table ES-4. Summary of compliance costs for the small airport industry. Rank Requirement Compliance Category Interquartile Mean of Initial Costs1 1 Runway Safety Area Requirements FAA $3,676,184 2 Runway Protection Zone Requirements FAA $1,492,556 3 Part 139 Aircraft Rescue & Firefighting (ARFF) Requirements, Newly Certificated Airports FAA $1,462,733 4 Any Other Equipment or Systems Related to Access Control2 Security $1,260,000 5 Part 139 ARFF Requirements, Existing Certificate Holders FAA $998,360 6 Perimeter Fencing for Part 139, Newly Certificated Airports FAA $784,390 7 Wildlife Hazard Fencing Requirements FAA $782,660 8 Security Fencing Requirements FAA $777,269 9 Checked Baggage Screening Security $768,055 10 Passenger Screening Security $637,377 11 Physical Access Systems Security $538,137 12 Vehicle Operations in Aircraft Operations Area, Enforcement & Control FAA $450,000 13 Customs & Border Protection Facilities Security $375,000 14 Airport Industrial Waste Requirements Environmental $306,881 15 Perimeter Fencing for Part 139, Existing Certificate Holders FAA $257,706 16 Geospatial Information System Requirements FAA $176,000 17 Consultant Selection for AIP-Funded Projects FAA $157,500 18 Environmental Assessment Environmental $152,102 19 Payments to workers compensation insurance carriers for OSHA support3 Occupational Safety and Health $125,000 20 Mobile Refueler Operations3 Environmental $108,000 1 Unless otherwise noted. 2 Interquartile mean cannot be determined for items with less than three responses. Arithmetic mean value is used. 3 Single airport response. Value of response used. Table ES-5. Federal requirements with highest initial per-airport costs.

8per airport, respectively. In some cases, the cost is the total reported cost of complying with an existing requirement, not the incremental cost of a new requirement adopted during the study period. The rankings are based on interquartile mean costs—the average of the survey data that range from the 25th percentile to the 75th percentile. The interquartile mean is used to avoid bias from extremely high or low reported costs. For some requirements, the survey did not distinguish between initial and recurring costs. Unless the cost item is obviously a continuing one, it is treated as an initial cost. Table ES-6 summarizes the 20 federal requirements with the highest recurring costs per airport. As noted previously, the survey results may understate the actual recurring costs on small airports because they do not capture costs associated with compliance tasks performed by airport staff. Eighteen out of the top 20 requirements have recurring costs that were lower than even the 20th ranked requirement for initial costs as summarized in Table ES-5. Rank Requirement Compliance Category Interquartile Mean of Recurring Costs1 1 Part 139 Aircraft Rescue & Firefighting (ARFF) Requirements, Newly Certificated Airports2 FAA $575,000 2 Vehicle Operations in Aircraft Operations Area, Enforcement and Control FAA $128,992 3 Vehicle Operations in Aircraft Operations Area, Emergency Operations FAA $51,230 4 Mobile Refueler, Material/Equipment Replacement3 Environmental $50,000 5 Geospatial Information System Requirements FAA $35,000 6 Part 139 ARFF Requirements, Existing Certificate Holders FAA $24,083 7 DBE Requirements for Federally Funded Projects DOT $11,000 8 Aboveground Storage Tanks, Material/Equipment Replacement Environmental $10,000 9 Pesticide Applicator Permit, Material/Equipment Replacement3 Environmental $10,000 10 Perimeter Fencing for Part 139, Newly Certificated Airports3 FAA $10,000 11 Requirements for Airfield Signs FAA $10,000 12 Occupational Health & Safety Training Occupational Safety and Health $9,138 13 Airport Industrial Waste Requirements2 Environmental $8,000 14 Wildlife Hazard Fencing Requirements FAA $6,600 15 Personal Protective Clothing, Annual Cost Occupational Safety and Health $6,267 16 Perimeter Fencing for Part 139, Existing Certificate Holders FAA $5,000 17 Vehicle Operations in Aircraft Operations Area, Driver Training Curriculum FAA $3,040 18 Disadvantaged Business Enterprise Requirements for Airport Concessions DOT $2,900 19 Universal Waste Generator, Material/Equipment Replacement2 Environmental $2,750 20 Drinking Water Supplier, Material/Equipment Replacement3 Environmental $2,000 1 Unless otherwise noted. 2 Interquartile mean cannot be determined for items with less than three responses. Arithmetic mean value is used. 3 Single airport response. Value of response used. Table ES-6. Federal requirements with the highest recurring per-airport costs.

9 Funding Compliance Costs Airports pay for compliance costs from FAA grants, PFCs, other airport funds, and other sources—sources that would otherwise be available for airport development. The case studies show that compliance with many of the new requirements added to operating expenses that were absorbed fully by airports, and other requirements were met by using existing staff time—taking time away from day-to-day duties in operating an airport. In general, airports reported that requirements triggering capital expenditures often qualify for financial assistance. The main form of assistance is AIP grants, which have local matching requirements. Small airports generally have limited funds available for capital development. Therefore, every AIP dollar spent to comply with a regulatory requirement is a dollar less that is available to spend on a capital project itself. Furthermore, the funds an airport spends on the local match for a regulatory compliance project are not avail- able for other capital projects that might enhance revenue or improve airport services and facilities. In addition, since 2007, the overall level of AIP funding has been stagnant, and funding is scheduled to decrease under the FAA Modernization and Reform Act, Pub. L 112-95 (February 14, 2012). This legislation also increases the local matching requirement for small airports from 5 to 10 percent. Preparation of plans or documents and modification of procedures, generally as a result of regulatory changes, are operating expenses that must be absorbed fully by the airports. Often airports are unable to generate supplemental revenue to pay additional staff or contractors to comply with these requirements. As a result, the requirements must be accomplished by existing staff, making it difficult for airports to estimate a cost. Nevertheless, the time required to comply with the requirements is ultimately taken away from accomplishing other opera- tional or administrative tasks. Therefore, staff time to address regulatory changes represents an opportunity cost to small airports. Tables ES-7 and ES-8 present estimates of non-airport funding (primarily federal) actually used by airports for the requirements with the 20 highest initial and recurring costs for the industry as a whole, based on the Phase 2 survey results. The estimates are derived by calculating the percentage of non-airport funding reported for the total sample of airports responding to the survey and applying that percentage to the industry costs shown in Tables ES-2 and ES-3, respectively. For these estimates, PFCs are treated as airport funds. For some compliance requirements, the survey questions covered specific funding sources (e.g., the FAA or TSA). For other requirements, the survey requested the amount of third- party funding without specifying the funding source. There was wide variation in the per- centage of non-airport funding reported in the survey. Because of the wide variation in reported non-airport funding, an average non-airport contribution per airport would not indicate the level of federal support received by a typical airport. Consequently, no attempt was made to estimate the average federal funding per airport. The survey did not include questions about funding sources for some requirements. For those requirements, the non-airport funding amount is assumed to be zero. Con- sidering these circumstances and the wide variation in the percentage of non-airport funding reported in the survey, the results shown in Tables ES-7 and ES-8 are consid- ered high-level approximations that show the order of magnitude of non-airport federal funding. Table ES-9 presents estimates of compliance costs for the small airport industry minus non-airport funding, based on the data reported in Table ES-4.

10 Conclusions The Cost of Compliance with Federal Requirements Continues to Grow A total of 291 federal actions related to FAA/DOT, environmental, security, and occu- pational safety and health requirements were issued from 2000 to 2010. Many new require- ments add continuing costs to airports by specifying periodic updates, inspections, monitoring, etc. The cost continues to grow. The FAA has an ongoing process to maintain and update all advisory circulars on a regular basis. The revisions may result in additional costs on airports as the FAA seeks to reduce the risk of accidents and incidents. The FAA is currently develop- ing requirements for safety management systems and environmental management systems that will likely add new costs for airports. The FAA is also moving toward requiring the use of Geospatial Information System (GIS) data to support airport surveys and development of approach procedures and electronic airport layout plans. Full implementation of this requirement will also result in additional costs on airports. Rank1 Requirement Industry Initial Costs Non-airport Funding2 Industry Net Initial Costs Percentage Amount 1 Runway Safety Area Requirements $695,166,000 95% $657,840,769 $37,325,231 2 Any Other Equipment or Systems Related to Access Control $265,608,000 Not reported $0 $0 3 Security Fencing Requirements $146,982,000 96% $141,453,316 $5,528,684 4 Wildlife Hazard Fencing Requirements $138,296,000 94% $129,462,173 $8,833,827 5 Physical Access System $130,122,000 Not reported $0 $130,122,000 6 Part 139 Aircraft Rescue & Firefighting Requirements, Existing Certificate Holders $106,026,000 91% $96,521,258 $9,504,742 7 Vehicle Operations in Aircraft Operations Area, Enforcement and Control $101,835,000 80% $81,181,004 $20,653,996 8 Enhanced Checked Baggage Screening3 $68,028,000 87% $59,391,243 $8,636,757 9 Runway Protection Zone Requirements $60,150,000 95% $57,179,732 $2,970,268 10 Enhanced Passenger Screening3 $54,101,000 32% $17,375,007 $36,725,993 11 Closed Circuit TV (CCTV) Monitoring System $51,639,000 Not reported $0 $51,639,000 12 Environmental Assessments (NEPA)4 $32,535,000 84% $27,398,328 $5,136,672 13 Consultant Selection Requirements for AIP-Funded Projects $29,295,000 96% $28,074,039 $1,220,961 14 Requirements for Use of Geospatial Information System (GIS) Techniques $28,371,000 90% $25,574,352 $2,796,648 15 Part 139 Fencing Requirements, Existing Certificate Holders $26,608,000 69% $18,259,711 $8,348,289 16 Airport Industrial Waste Requirements $25,686,000 98% $25,043,852 $642,148 17 Airfield Sign Requirements $22,042,000 96% $21,266,573 $775,427 18 Perimeter Security Systems or Equipment $16,781,000 Not reported $0 $16,781,000 19 Aboveground Storage Tank Requirements $15,810,000 Not reported $0 $15,810,000 20 Construction Notice of Intent Requirements $12,094,000 Not reported $0 $12,094,000 Total $2,027,175,000 68% $1,386,021,357 $375,545,643 1 Rank based on Table ES-2. 2 Unless otherwise noted non-federal funding is sum of reported FAA funding and other funding sources. 3 Based on reported TSA funding and other funding sources. 4 Based on reported third-party funding. Third-party funding assumed to be applied to initial costs. Table ES-7. Net initial cost of the most costly federal requirements for the small airport industry.

11 Rank1 Requirement Industry Recurring Costs Non-airport Funding2 Industry Net Recurring Costs Percentage Amount 1 Vehicle Operations in Aircraft Operations Area, Enforcement and Control $29,191,000 46% $13,345,060 $15,845,940 2 Vehicle Operations in Aircraft Operations Area, Emergency Operations $12,229,000 1% $101,633 $12,127,367 3 Requirements for Use of Geospatial Information System (GIS) Techniques $5,642,000 0% $0 $5,642,000 4 Part 139 Aircraft Rescue & Firefighting (ARFF) Requirements, Newly Certificated Airports $3,278,000 13% $427,565 $2,850,435 5 Vehicle Operations in Aircraft Operations Area, Vehicle Access $3,040,000 3% $85,593 $2,954,407 6 Vehicle Operations in Aircraft Operations Area, Vehicle Inspection and Marking $3,013,000 0% $0 $3,013,000 7 Mobile Refueler, Material and Equipment Replacement $2,635,000 Not reported $0 8 Part 139 ARFF Requirements, Existing Certificate Holders $2,558,000 13% $336,598 $2,221,402 9 Requirements for Airfield Signs $2,449,000 2% $58,310 $2,390,690 10 Aboveground Storage Tanks, Material and Equipment Replacement $2,108,000 Not reported $0 $2,108,000 11 Disadvantaged Business Enterprise (DBE) Requirements for AIP-Funded Projects $1,773,000 5% $85,781 $1,687,219 12 Occupational Health & Safety Training $1,218,000 Not reported $0 $1,218,000 13 Wildlife Hazard Fencing Requirements $1,166,000 93% $1,084,844 $81,156 14 Pesticide Applicators, Material and Equipment Replacement $1,116,000 Not reported $0 $1,116,000 15 Personal Protective Clothing, Annual Cost $971,000 Not reported $0 $971,000 16 Vehicle Operations in Aircraft Operations Area, Driver Training Curriculum $867,000 8% $67,314 $799,686 17 Airport Industrial Waste Requirements $670,000 0% $0 $670,000 18 Perimeter Fencing for Part 139, Existing Certificate Holders $516,000 0% $0 $516,000 19 Modified ARFF Training Requirements $401,000 0% $0 $401,000 20 DBE Requirements for Airport Concessions $396,000 6% $21,952 $374,048 Total $75,237,000 21% $15,614,648 $56,987,352 1 Rank based on Table ES-3. 2 Unless otherwise noted non-federal funding is sum of reported FAA funding and other funding sources. Table ES-8. Net recurring costs of the most costly federal requirements for the small airport industry. Compliance Category Total Cost ($ Millions)1 Estimated Non-airport Payments ($ Millions)2 Industry Net Cost ($ Millions)2 FAA/DOT $1,459.5 $965.7 $493.8 Security $610.8 $417.6 $193.2 Environmental $90.2 $57.6 $32.6 Occupational Safety and Health $11.7 $2.4 $9.3 Total Compliance Costs $2,172.2 $1,443.4 $728.8 1 Includes initial and recurring costs where applicable. 2 Column totals may not add up due to rounding. Table ES-9. Summary of net compliance cost for the small airport industry.

12 Environmental regulations are also reviewed periodically to evaluate options that streamline requirements and update outdated practices. For example, prior to 2002, the SPCC regulations had not been updated since 1990. In some cases, the amended regulations minimized the regu- latory cost for small airports (i.e., exemptions for underground storage tanks and containers with capacities less than 55 gallons), whereas other changes resulted in increased regulatory costs (e.g., integrity testing and plan updates). In the security area, the TSA has reduced the funding to airports through the law enforce- ment officer (LEO) support program. The reduced TSA assistance means airports are shoul- dering a higher share of supplying required law enforcement presence at or near screening checkpoints. In addition, airports have reported an increase in the number and complex- ity of TSA reviews and audits. These review and audit activities require full participation of airport staff during the audit itself and following the audit to respond to reports and recommendations. Small Airports Do Not Have the Revenue-Generating Capacity to Meet the Costs of Expanding Requirements For many small airports, low levels of passenger enplanements and/or operations limit their ability to raise revenue to meet the cost of new requirements. Because of low traf- fic levels and limited tenant operations, the airports have little leverage with airlines to increase fees and charges to cover new compliance costs. Therefore, the additional costs reduce the operating margin (if any) that airports generate and ultimately reduce the airport’s cash reserves. This situation is particularly important because small airports are typically subject to the same or similar requirements as larger airports with greater revenue-generating capacity. For example, a new $500,000 requirement would cost a small airport with 20,000 passengers $25 per passenger. That same requirement at an airport with 2 million passengers would cost only 25 cents per passenger. Although two of the case study airports operate industrial parks or multimodal trans- portation centers that provide supplemental revenue to help defray the costs of compliance, most small airports do not have such ancillary revenue sources. Published Cost Estimates for Regulatory Requirements Understate the Full Compliance Costs There are two major causes for the understatement of costs by regulatory agencies. First, agencies published cost estimates for only a small portion of the federal requirements iden- tified in the study. Many requirements are adopted without an estimate of cost. In general, only formal rulemaking documents may be subject to a requirement for a cost analysis. For example, only six of the 140 requirements adopted by the FAA were formal regulatory documents. The FAA typically adopts ACs, PGLs, CertAlerts, and other guidance documents without analyzing compliance costs, even when the guidance is effectively binding on air- ports. Similarly out of 81 security requirements adopted during the study period, only two were formal regulatory documents. Even when formal rulemaking is employed, unless the requirement will meet minimum cost levels, or will have a significant impact on small entities, a detailed estimate of costs is not required. Only two of the six FAA regulatory documents issued during the study period included a full analysis of compliance costs. Fourteen of the 39 environmental requirements included specific cost projections. Additionally, in many cases, regulatory actions had multiple components. Costs may be projected separately for each component, and some rules may include combinations of components with cost reductions and increases.

13 Second, based on the survey results, cost estimates published by agencies often understate the results of airports’ actual experience. For example, the FAA’s projections of the cost of compliance with the 2004 amendments to Part 139 were lower than the initial and recurring costs reported by existing certificate holders and lower than the initial costs reported by newly certificated carriers. Estimated costs from the economic analysis for Phase I environmental site assessments (ESAs) ranged from $2,185 to $2,190. The results of industry experience with preparing an ESA for airports and related properties range from $5,000 to $9,000. The Cost of Compliance with Unfunded Federal Requirements Continues to Grow The 291 federal requirements identified in this study (with limited exceptions) either added to or expanded upon existing requirements. Airports must absorb at least some of the costs of these requirements and, in many cases, must absorb the full costs. FAA/DOT Requirements Only those FAA requirements that involve capital development may be eligible for federal AIP funding. Requirements that affect airport operations, administration, or maintenance are ineligible for AIP funds. For example, one of the case study airports with a substantial run- way safety area project reported receiving only a 50 percent contribution from the FAA, even when statutory federal share was 95 percent. DOT has no independent funding programs available for airports. Moreover, AIP eligibility does not guarantee funding. Even when AIP funding is available, airports must pay a local matching share. This matching share recently increased from 5 to 10 percent of eligible project costs. Also, use of AIP funds to comply with federal requirements reduces the amount of funds available for actual project implementation. Finally, the level of AIP funding has not kept pace with increases in federal requirements. AIP funding was essentially flat from FY 2008 through FY 2011 at approximately $3.5 billion. AIP funding decreased in FY 2012 by approximately $200 million and will remain at this level through FY 2015. PFCs are available to help pay for compliance costs associated with eligible capital projects. However, like AIP funds, PFCs cannot be used for operational costs. In addition, the PFC ceil- ing has not been raised since 2001. The only source of increased PFC revenue since that time has been through increased passenger traffic. Since 2007, the year before the last recession started, passenger traffic at small hub and non-hub airports has declined by 8 percent and 3 percent, respectively. In short, PFC revenue opportunities for small airports have declined while compliance requirements have increased. Environmental Requirements Funding to comply solely with environmental requirements is even more limited. There is no distinct federal program (comparable to AIP) for general environmental compliance. ACRP Synthesis of Airport Practice 24: Strategies and Financing Opportunities for Airport Environmental Programs (2011) provides a comprehensive list of federal and state funding sources for environ- mental initiatives. However, in many cases, funds are provided only for voluntary initiatives, not for mandatory compliance actions. In some cases, AIP funds associated with other projects may be used to fund a portion of the environmental mitigation measures necessary for the project or for projects needed to comply with air and water quality requirements. However, the limitations discussed above apply.

14 Security Requirements TSA and AIP funds have been provided for projects to comply with security requirements. As with FAA requirements, the issues of local matching requirements and limits on annual appropriations also arise. Moreover, small airports may not receive the same priority for funding as larger airports with perceived greater security concerns. In addition, Congress has prohibited the use of AIP grants for screening projects since 2003. Federal funding is not available for operational and administrative costs, which have been growing. For example, TSA has increased its monitoring, auditing and investigation activi- ties, with a corresponding increase in costs to airports. The LEO support program provides reimbursement to participating airports for LEO staffing at screening checkpoints. However, airports report the costs of meeting TSA requirements for program funding are substantial. In addition, TSA has been reducing its share of costs reimbursed. Occupational Safety and Health Requirements OSHA does not have direct jurisdiction over airports. In these circumstances, there is no direct federal support for occupational safety and health compliance. When airport contrac- tors reflect OSHA compliance costs in their bids, AIP funding could be available, but with the limitations noted previously. However, OSHA requirements may be implemented through states or included in vol- untary programs. During the study period, 21 compliance actions were adopted by OSHA, without federal funding. The Limited Staff Resources of Small Airports Exacerbate the Costs of Compliance with Federal Requirements, Especially for Non-hub Airports Non-hub airports, in particular, have limited staff available to satisfy new compliance requirements. For example, the three non-hub airports included in the case studies aver- age 10 full-time employees for all administrative and operational functions. Moreover, the limited revenue opportunities available preclude hiring additional staff or contracting out for assistance with compliance requirements. Small airport staff members are responsible for a variety of duties from performing admin- istrative, maintenance, and operational tasks to understanding, planning, implementing, and enforcing regulatory requirements. When a new requirement is added, existing staff must assume responsibility for compliance. In addition, management cannot readily reassign exist- ing duties to other employees to compensate for the added effort of meeting the new require- ment. For example, one non-hub airport manager stated that the primary cost-driver for compliance with the FAA’s new airfield signage requirements was not the installation of the signs themselves but the ongoing costs of maintaining visibility. In the summer, additional staff time is required to mow around signs. In the winter, additional time is required to keep signs clear of snow. Furthermore, because non-hub airports typically have limited staff with so many duties, as highlighted by the case studies, airport staff do not always have the time or expertise to understand all the requirements the airport is subject to, especially new ones. The lack of expertise and limited available time could increase the risk of inadvertent non-compliance. Small hub airports generally have greater staff resources, but more complex operational and administrative requirements, than non-hub airports. Even with larger staff, department heads and line personnel are still more likely to be generalists than specialists. As with non- hub airports, small hub airports have comparable impediments to raising revenue to pay for

15 specialized expertise (through staff or contractors) needed to understand and implement new compliance requirements as they are adopted. The Prohibition on Charging Rent to the TSA Costs Small Airports Substantial Revenue Airports are prohibited from charging rent to the TSA for the use of passenger and bag- gage screening space. For the case study airports, the lost revenue ranged from $46,000 to $350,000. For airports with TSA space funded by AIP grants, this prohibition would not have an impact, because the grant assurances would prohibit a charge. Airports are permit- ted to charge for utilities and janitorial services for screening space, but most airports do not seem to be aware of this policy and do not exercise the privilege. The Recent Trend of Applying Uniform Standards to All Airports Results in a Disproportionate Responsibility on Small Airports The FAA, in particular, has in recent years moved toward applying uniform requirements for all airports. The FAA has determined that there are benefits for the safety and efficiency of the aviation system when airports adopt uniform practices and procedures. However, when the FAA has adopted uniform requirements, the requirements tended to reflect the operations and airfield design of large airports. Therefore, small airports are paying added costs to develop plans and procedures that may be excessive to their needs. Small airports are concerned that the FAA will continue this practice when it implements requirements for safety management systems and environmental management systems. Strategies Additional Research The research indicated that airports and agencies use a variety of methods to estimate cur- rent and projected cost impacts of regulations. The development of a standardized methodol- ogy for projecting costs was beyond the scope of this research. Additional research to develop standard procedures for cost projections and calculations could improve projections of cost impacts of regulatory actions and could be useful to airport operators in developing capital and operating budgets. A single approach, however, may not be suitable for all federal agencies and all regulatory actions. There did not appear to be a relationship between compliance costs and two measures of activity—enplanements and commercial operations. The small number of responses to indi- vidual questions may have contributed to this outcome, but the outcome also could be attrib- uted to the various approaches airports take to achieve compliance. Also, anecdotal informa- tion suggests compliance costs do not depend on enplanement or operations, as some small airports report compliance costs comparable to large airports. Additional research focused on determining whether statistically significant correlations exist between cost and activity level or other variables (e.g., airport size) would be useful. If such correlations do exist, the correlations could be used by small airports to estimate their cost of compliance, without the need to implement costly and complex accounting systems. Options to Limit Exposure to Unfunded Requirements in the Future In the research undertaken in this study, including the case studies, a number of options were identified that could help limit small airports’ exposure to unfunded requirements in

16 the future. Most of the options, however, are not within the airports’ control (and are outside the scope of this study); they would require action by government agencies and regulators— for example, increased funding, changes to policy or procedures to account for differences in the size and complexity of airports, or changes to policy or procedures that would estimate compliance costs more frequently and improve the accuracy and reliability of agency cost projections. Two options identified that are within the airports’ control are as follows: • Consider engaging federal, state, and local regulators during the regulatory comment period. Increased participation by small airports during this period could include provid- ing comments in narrative form and/or submitting cost data. • Provide public comment responses when agencies issue ACs, policy statements, PGLs, and related documents in draft form. The public comment process provides airports a chance to inform agencies of the cost impact of new proposals. To assist small airports with engaging regulators, local officials, legislators at all levels, and other stakeholders, a presentation template, located on the ACRP Report 90 summary page of the TRB website (www.trb.org/Main/Blurbs/168945.aspx) and included with notes as Appendix D, summarizes the information on the compliance requirements issued between 2000 and 2010 and their overall industry impact. The template can be modified to provide tailored information regarding the requirements applied to individual airports as well as the cost to the small airport industry.