Attracting Investment at General Aviation Airports Through Public–Private Partnerships (2019)

Below is the uncorrected machine-read text of this chapter, intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text of each book. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.

47 General aviation airports have long faced challenges associated with self-sufficiency, competi- tion for grant funding, increasing revenues, and attracting private investment on their facilities. For many general aviation airports, their primary source of capital funding is from the FAA’s Airport Improvement Program or their state’s aviation facilities development program. This work sought to help address some of these challenges by examining efforts to attract private investment at general aviation airports through PPPs. Larger airports and infrastructure in general in the United States are seeing an increased inter- est from the private sector in entering into PPP agreements. In some cases, these PPP agreements even have involved the transfer of financial, construction, maintenance, and operational risk. Such agreements, especially those that are structured over a medium or long-term basis and have involved the transfer of risk, have provided large airports with increased flexibility. A review of recent literature found this trend to be growing not only for U.S. airports, but also for large airports in Europe and elsewhere. This synthesis aimed to summarize the current state of the practice of general aviation air- ports and, specifically, what general aviation airport officials are doing to attract more private investment. While researchers for this synthesis reached out to more than 600 general aviation managers and professionals and received input from more than 40 officials, the limited scope allowed at best only a surface-level understanding of how general aviation airports are partner- ing with the private sector to finance and deliver needed airport infrastructure. Findings Several key findings emerged from this research effort. The review of literature highlighted the fact that most PPPs in aviation are focused on larger, commercial service airports. It also became clear that little has been written and published about general aviation airports and PPPs. There has also been an increase in PPPs at large airports in recent years, as with the surface side of transportation. PPPs are growing more popular as a method for meeting challenges with limited government resources. Still, the public perception is not always positive or often easily understood (50). The survey results report that the airports have entered into PPP agreements with several sep- arate entities or have several key stakeholders, not just one. Airport officials noted working with multiple different stakeholders in their negotiations in developing their PPPs, including working with a mix of private, federal, state, and local partners. In doing so, many survey respondents noted that working with private partners to share risk had helped to increase project financing flexibility and, in some cases, helped the general aviation airport deliver projects on-time and C H A P T E R 5 Conclusions and Future Research

48 Attracting Investment at General Aviation Airports Through Public–Private Partnerships within the original scope and budget. A few participants did note that change orders during the project duration did cause adverse effects. Of other interest was the fact that airports entered in PPP for different reasons. More than half of the airports that responded selected eight reasons indicating that they are looking to private partners to accomplish a variety of objectives. There are also differences in how the partnerships are structured, with no clear standard model. As one might expect given the unique nature of general aviation airports, PPPs are structured to meet the needs of the particular airport, using the tools available. Many airports across several states have turned to the use of professional airport management companies in an effort to accomplish their goals. This activity includes not only managing the facilities but also leveraging their expertise to increase activity and revenue as well as taking advan- tage of their real estate management and capital development. These firms are often compen- sated through a fee for service and also incentivized for increased activity and revenue. In many respects, running an airport is very much about managing real estate—knowledge in that arena is paramount. The survey results also provide some insight on the benefits and limitations of PPPs. Inno- vative solutions and increased efficiencies can be gained while limited government flexibilities, the misperception of a private-sector takeover of a facility, and unforeseen challenges can be downsides. However, open communication between the stakeholders, transparency through- out the process, and a willingness by government in addressing needs can help make such a project successful. Future Research A more comprehensive examination of this topic could help the general aviation community gain a more complete understanding of PPPs and how they best serve general aviation airports and facilitate additional private investment. During the course of this research, it became evident that many general aviation airport officials including some who were just entering into such partnerships this year—were new to PPPs. For this reason, the lessons learned and best prac- tices recommendations have yet to be fully understood. Additional research could help address questions that arose from this work. This research established that airports are pursuing PPPs for many different reasons and are structuring them in many different ways on an ad hoc basis. Further research could help provide additional guidance to airports looking to attract private investment to meet their needs. This guidance includes the following: • Identifying the general type of potential private partners (i.e., key stakeholders including developers, leasing companies, potential tenants, economic development agencies, charitable foundations) and the roles that they could play in the arrangement. • Identifying nontraditional sources (state and local) of project funding and financing that airports can use to facilitate or partner with the private sector (i.e., nonaviation grants/loans, sales taxes, economic development funds). • Identifying proven and innovative methods and incentives to attract private partners. • Developing a typology of PPPs for general aviation airports including benefits, limitations, and risks. • Developing more thorough an understanding of the various types of risks and how best to manage and mitigate them. • Developing a matrix or selection tool to help match the partnership type with the need, pur- pose, objectives, and available resources of the airport. For example, the Federal Highway

Conclusions and Future Research 49 Administration’s Office of Innovative Program Delivery (IPD) recently developed a suite of sketch and detail-level tools and programs that provides tools, expertise and financing to help the transportation community explore and implement innovative strategies to deliver costly and complex infrastructure projects. As part of this program IPD developed a PPP toolkit that addresses federal requirements and four key areas of PPP implementation: legis- lation and policy, planning and evaluation, procurement, and monitoring and oversight. A similar suite of tools that addresses legislation, planning, procurement, monitoring, and other aspects of PPPs could be developed and tailored specifically for use by the general avia- tion airport stakeholders. • Identifying methods to increase the public’s understanding and acceptance of PPPs. • Identifying methods to increase local, state, and federal governments’ understanding of PPPs to facilitate agreements better. This area includes a better understanding of the legal, regulatory, and statutory environments around the country for initiating and completing such arrange- ments. Some states cannot and/or do not participate in PPPs. • Improving the understanding of alternative project delivery, its relationship to PPPs, and the ability to use such delivery in the airport environment. Much of this future research could be consolidated to comprise a guidebook for general aviation airports on developing PPPs to provide solutions to several challenges. Many general aviation airports are new to PPPs, as are many others who manage and maintain other trans- portation assets. Such a document would provide much needed guidance to the general aviation community.