In draft principles that were leaked this week, the Trump Administration's infrastructure initiative is taking shape and highlights airport financing and project opportunities. These new principles give clarity on the potential funding opportunities that will be available for airport projects, including public-private partnerships (P3s) under the Administration's $1.7 trillion infrastructure initiative. The agencies implementing these new principles, such as the Department of Transportation and Federal Aviation Administration (FAA), should have clear objectives to develop a framework for the intended projects and funding opportunities with states, local governments, and private entities.
These funding principles are a promising step in the Administration's efforts to get state, local, and private entities involved in airport projects. Not only does it appear that the Administration may commit up to $100 billion in federal grants for infrastructure projects, but the Administration will incentivize private investment through the tax-advantageous bonds. Baker's top-ranked aviation team, which has represented multiple airport sponsors, hedge funds, private equity firms, developers, and FBOs in airport matters, including the seminal airport P3 for SJU in San Juan, PR, stands ready to assist clients in helping to navigate and take advantage of the Administration's new infrastructure initiative.
The draft principles provide clarity in two areas of the Administration's infrastructure initiative affecting airports—(i) funding and (ii) infrastructure improvements. First, the federal government will incentivize state, local, and private investment in airports through federal grants up to 20% of a project's total cost. Second, the Private Activities Bond (PAB) program would allow broader categories of public purpose infrastructure to include airports, while eliminating the transportation volume caps on PABs and the state volume caps on PABs. Third, the federal government would provide funding for the development of rural airports, making funds available for states and specific projects.
To improve existing financing programs, the streamlined passenger facility charge (PFC) process would be extended from non-hub airports to small hub sized airports and the Administration would support the expansion of Transportation Infrastructure Finance and Innovation Act (TIFIA) program eligibility for airport financing options. For airports, the Administration would look to create more efficient FAA oversight of non-aviation development activities at airports, reduce barriers to alternative project delivery for airports, clarify authority for incentive payments under the Airport Improvement Program (AIP), and move oversight of AI funds to post-expenditure audits. When combined with the financing principles above, these initiatives may further the profitability of airport projects through reduced costs and additional funding options.
As airport P3 opportunities will undoubtedly grow with the implementation of the Administration's initiatives, the Administration must also balance its spending with a smaller federal purse after the recent tax cuts. To address the costs, the U.S. Chamber of Commerce has called for a 25-cent increase in the gas tax over the course of five years and urged the Administration implement a more efficient permitting process for P3s.1