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Revenue Producers Policy

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Background

The current reauthorization for the FAA, “Vision100 – Century of Aviation Reauthorization Act,” included a provision that allows the use of Federal AIP funds for revenue-producing facilities, such as hangars or fuel farms. Specifically, the law states “The Secretary may decide that the costs of revenue producing aeronautical support facilities, including fuel farms and hangars, are allowable for an airport development project at a nonprimary airport if the Government’s share of such costs is paid only with funds apportioned to the airport sponsor under section 47114 (d)(3)(A) (nonprimary entitlement) and if the Secretary determines that the sponsor has made adequate provision for financing airside needs of the airport.”

Project funding

The Federal share of the cost of these revenue-producing facilities can only be funded with nonprimary entitlements. State apportionment or discretionary funds cannot be used for the Federal share of these project costs.

Types of facilities

Current policy limits eligibility to hangars and fueling facilities as revenue-producing facilities. The intent of the statute is to support the construction of “new” facilities which “add additional revenue producing capability” for the facility; however, the acquisition of existing facilities will be addressed on a case-by-case basis and requires approval from FAA headquarters. Replacement of facilities is only allowed if the replacement is to increase capacity, with a demonstrated need.

Airside development needs

The law requires that the FAA must determine if the sponsor has made adequate provision for funding the airport’s airside needs before a grant can be issued for the construction of these revenue-producing facilities. In order for that determination to be completed, the sponsor must provide documentation outlining the airport’s airside development needs and a financial plan for addressing those needs. Additionally, safety critical RPZ and RSA standards, (including a determination that the airport meets current FAA Safety Area and Runway Protection Zone standards to the maximum extent feasible) are met prior to funding revenue producing development projects. Also the published approach and airfield category must agree to the current ALP, and the airport must have clear approaches.

As an example, a low Pavement Condition Index (PCI) rating (or a “Fair” 5010 runway condition) would indicate a need to invest in the airport’s runways before funding a revenue-producing facility. The financial plan can include AIP funding, but keep in mind that we have to fund the highest priority work with nonprimary entitlement and revenue-producing facilities can only be funded with nonprimary entitlement. In addition, if an airport’s capital improvement plan identifies a need for Discretionary/State funding in the next three years, funding for revenue-producing facilities cannot be approved.

Maintenance is not eligible. Replacement of existing pumps with card reader pumps are not eligible. Under no circumstances will demolition of an existing fuel farm, environmental mitigation, and clean up be eligible for AIP.

Requirements for Hangars

In addition to the above, the following must be complied with for all hangars before AIP funding can be approved:
  • In situations where the sponsor delegates management of a hangar to the FBO, the FBO becomes an agent of the sponsor and can receive an administrative fee for this service.  The sponsor must enter into a short-term lease/management agreement for this service, which is separate from the FBO lease agreement.
  • The FBO can offset direct expenses related to the management/operation of the hangar. (i.e., maintenance, utilities, and insurance costs) against the revenue that is produced from any subleases.
  • The airport must receive the revenue generated from the subleases that is not offset by the FBO’s expenses and/or administrative fee.  The primary purpose is to provide revenue to the airport not the FBO. 
  • The hangar can only be used for storage of aircraft (no pro-rations for other aeronautical uses, i.e., maintenance, paint shop, aircraft restoration, etc.).
  • The FBO must make the hangar available to all aeronautical users without discrimination and cannot make it available only to his customers.
  • The aeronautical users cannot be denied the use of the hangar if they do not obtain services from the FBO (i.e., purchase of fuel).
  • Title to the hangar must remain with the sponsor.
  • No improvements are to be made to the hangar without sponsor approval.

Project Documentation

The following documents must be submitted to the FAA before the project’s eligibility for AIP funding can be approved:

  • Statements that airside development needs have been met, or a financial plan to fund airside needs over the next 3 years.
  • Justification for the project.

Insufficient or incomplete documentation may require additional information from the sponsor or may result in a determination that the proposed project is ineligible for AIP funding.

Note: 

  1. In addition, any other aspects of the proposed eligibility determination will be based on current AIP eligibility guidelines as described in FAA Order 5100.38.
  2. All projects approved under this provision must be identified on an approved ALP.  Construction of these facilities cannot proceed until an approved airspace review has been received.

The intent of the law is to provide for the construction of facilities to generate additional revenue for the operation, maintenance, and development of nonprimary airports.  Sponsors must maintain complete documentation of all revenue received from these facilities, since the FAA may periodically review those records to ensure that the airport is receiving sufficient revenue.

 

Resources

FAA Orders

Guidance

  • AC 150/5230-4 - Aircraft Fuel Storage, Handling, and Dispensing on Airports

Regulations/Policy

  • Vision 100 - Century of Aviation Reauthorization Act of 2003

Updated: 1:47 pm ET July 28, 2008