Shared Flashcard Set

Details

Module 10
Capital Development and Funding for Airports
85
Aviation
Professional
08/28/2009

Additional Aviation Flashcards

 


 

Cards

Term

10.1

 

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

Definition

1.  Bond markets

 

2.  Various federal airport improvement programs

Term

10.2

 

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

Definition

1.  Determine permitted land-use

 

2.  Market analysis

 

3.  Pro-forma economic analysis

 

4.  Construction

 

5.  Operating plan

Term

10.3

 

What four elements affect the development potential of airport property?

Definition

1.  Physical constraints

 

2.  Zoning regulations

 

3.  Political factors

 

4.  Restricted uses (e.g. conveyances)

Term

10.4

 

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

Definition

 

 

Market analysis

Term

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

Definition

 

 

FALSE

 

There has been an INCREASING number of instruments!

Term

10.6

 

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

Definition

 

1.  General obligation

 

2.  Revenue

 

3.  Hybrid

Term

10.7

 

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

Definition

 

 

General obligation bonds

Term

10.8

 

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

Definition

 

 

They have a community guarantee

Term

10.9

 

What are the three advantages of issuing revenue bonds?

Definition

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

Term

10.10

 

What is an industrial development bond (IDB)?

Definition

 

 

A special type of revenue bonds

Term

10.11

 

What are private activity bonds?

Definition

 

 

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

Term

10.12

 

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

Definition

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

Term

10.13

 

True or False

 

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

Definition

 

 

TRUE

Term

10.14

 

A hybrid bond is also known as what?

Definition

 

 

A double barreled bond

Term

10.15

 

What is a hybrid bond?

Definition

 

 

A combination of PFC revenue and GARBs or GOBs

Term

10.16

 

What are the two primary advanateges of hybrid bonds?

Definition

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

 

2.  The taxing power of the issuer is not used

Term

10.17

 

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

Definition

1.  Bond ratings

 

2.  Interest costs

 

3.  Defaults

Term

10.18

 

What is the purpose of a bond rating?

Definition

 

 

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

Term

10.19

 

Who are the three main bond rating companies?

Definition

1.  Standard and Poors

 

2.  Fitch

 

3.  Moody's

Term

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?

Definition

1.  It should be TIMELY

 

2.  It should be RELIABLE

 

3.  It should be VALID

Term

10.21

 

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

Definition

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

Term

10.22

 

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

Definition

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

Term

10.23

 

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

Definition

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

Term

10.24

 

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

Definition

 

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

Term

10.25

 

What was the purpose of the Aviation Trust Fund?

(2 items)

Definition

 

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

Term

10.26

 

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

Definition

 

Created the Airport Development Aid Program (ADAP)

Term

10.27

 

What was the importance of the 1982 Airport Improvement Program?

Definition

 

 

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

Term

10.28

 

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

Definition

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

Term

10.29

 

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

Definition

 

Entitlement and Discretionary

Term

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?

Definition

 

 

Entitlement funds

Term

10.31

 

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

Definition

 

 

Discretionary funds

Term

10.32

 

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

Definition

 

 

$5 million

Term

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.

Definition

 

 

TRUE

Term

10.34

 

What are the four types of airports?

Definition

1.  General Aviation

 

2. Reliever

 

3. Non-primary commercial

 

4.  Primary commercial

Term

10.35

 

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

Definition

 

 

Non-primary commercial airports

Term

10.36

 

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

Definition

 

 

Primary commercial airports

Term

10.37

 

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

Definition

 

 

General aviation airports

Term

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?

Definition

 

 

Reliever airports

Term

10.39

 

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

Definition

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

Term

10.40

 

What are the two types of operations at an airport?

Definition

 

 

Local and Itinerant

Term

10.41

 

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

Definition

 

 

Local operation

Term

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?

Definition

 

 

Itinerant operation

Term

10.43

 

What is a Letter of Intent?

Definition

 

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

Term

10.44

 

What is the primary advantage of a Letter of Intent?

Definition

 

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

Term

10.45

 

What four factors is the National Priority System based on?

Definition

1.  Purpose of the project

 

2.  Airport component affected

 

3.  Specific type of project

 

4.  Size and type of project

Term

10.46

 

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

Definition

 

 

The purpose of the project

Term

10.47

 

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

Definition

 

 

Safety and security projects

Term

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?

Definition

 

 

National Civil Aviation Review Committee

Term

10.49

 

What piece of federal legislation created the NCARC?

Definition

 

 

The 1996 FAA Reauthorization Act

Term

10.50

 

What is the State Block Grant Program?

Definition

 

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

Term

10.51

 

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

Definition

 

 

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

Term

10.52

 

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

Definition

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

Term

10.53

 

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

Definition

1.  Letter-of-credit

 

2.  Advance check

 

3.  Reimbursement check

Term

10.54

 

How long do grant assurances remain in effect?

Definition

 

 

20 years

Term

10.55

 

What two grant assurances never "sunset?"

Definition

1.  Prohibition on exclusive rights

 

2.  Prohibition on revenue diversion

Term

10.56

 

Grant assurances attempted to balance which three competing needs?

Definition

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

Term

10.57

 

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

Definition

 

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

Term

10.58

 

What is the maximum TOTAL PFC allowed under ASCEA?

Definition

 

$12 per passenger

Term

10.59

 

Can PFCs be included in bankruptcy proceedings?

Definition

 

 

No.

Term

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?

Definition

 

 

75%

Term

10.61

 

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

Definition

 

 

Quarterly

Term

10.62

 

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

Definition

 

 

AIR 21

Term

10.63

 

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

Definition

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

Term

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?

Definition

 

 

A double taxation

 

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

Term

10.65

 

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

Definition

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

Term

10.66

 

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

Definition

 

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

 

OR

 

Mitigate adverse noise impacts

Term

10.67

 

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

Definition

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.

Term

10.68

 

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

Definition

1.  Have an approved ALP on file

 

2.  Have an airspace and environmental study completed

Term

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

Definition

 

 

TRUE

Term

10.70

 

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

Definition

 

 

Aaa

Term

10.71 

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

Definition

 

 

Baa

Term

10.72

 

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

Definition

 

 

AAA

Term

10.73

 

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

Definition

 

 

BBB

Term

10.74

 

What is a rate covenant?

Definition

 

 

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.

Term

10.75

 

What three characteristics define a rural airport?

Definition

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

Term

10.76

 

The O'Hare agreements concluded what?

Definition

 

 

That airlines can back revenue bonds

Term

10.77

 

True or False

 

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

Definition

 

FALSE

 

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

Term

10.78

 

What is a limited tax bond?

Definition

 

 

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

Term

10.79

 

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

Definition

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

Term

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

Definition

 

 

TRUE

Term

10.81

 

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

Definition

1.  Special programs

 

2.  Reconstruction

 

3.  Standards

 

4.  Upgrade

 

5.  Capacity

 

6.  New airports (capacity driven)

 

7.  New airports (community driven)

Term

10.82

 

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

Definition

 

 

The FAA can reduce future entitlement funds by a like amount

Term

10.83

 

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

Definition

1.  Ability of airport management to successfully manage capital projects

 

2.  Airport's enplanement history

Term

10.84

 

What does the Davis-Bacon Act require of contractors?

Definition

 

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.

Term

10.85

 

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

Definition

 

 

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

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