Commercial airports with no debt and a bit of money on hand will receive CARES Act payouts far above the average due to a formula used by the Federal Aviation Administration (FAA) to calculate payments, based on criteria put forth by the U.S. Congress. The majority of airports will receive funding that will cover their operating expenses for a few months, but for others, the outsized funding amounts will cover operating expenses for many years.
Hartsfield-Jackson Atlanta International Airport (ATL) will receive the largest grant, at $338.54 million, which will cover 1.12 years of operating expenses, according to data compiled by Mark Sixel, president of Sixel Consulting Group. That compares favorably to other top-10 airports, whose grants averaged around six months of operating expenses.
But those numbers are minuscule compared to the grant won by North Dakota’s Devils Lake Regional Airport (DVL), which will cover operating expenses for just under 50 years; or California’s Merced Regional Airport/Macready Field (MCE), which was awarded a grant equal to operating expenses for 43.7 years, according to Sixel’s calculations. Other big recipients include Michigan’s Alpena County Regional Airport (APN) at 36.87 years, Maine’s Knox County Regional Airport (RKD) at 34.69 years and Montana’s Yellowstone Airport (WYS) at 28.83 years, among many others.
Those five airports each had 2018 enplanements well under 20,000; and the CARES Act awards translate into payments of more than $1,000 per enplanement for those airports and several others. In contrast, ATL’s per-enplanement award came in at $6.53. Los Angeles International Airport (LAX) was awarded $323.6 million, translating into $7.59 per enplanement, and Dallas/Fort Worth International Airport (DFW) will receive $299.2 million, or $9.12 per enplanement.
The allocations were calculated using this formula:
• 50 percent of the total allocation is based on the number of enplanements the airport had during calendar year 2018 as a percentage of total 2018 enplanements for all commercial service airports.
• 25 percent of the total allocation is based on the sponsor’s fiscal year 2018 debt service as a percentage of the combined debt service for all commercial service airports; and
• 25 percent of the total allocation is based on the sponsor’s fiscal year 2018 ratio of unrestricted reserves to its respective debt service.
According to Sixel, the anomaly arose in the calculation of the ratio of unrestricted reserves to debt service. “The problem came in where you come up with an airport that has zero debt service and a little bit of money in the bank,” he said. “It didn’t matter how much money – as long as they had a dollar in the bank and zero debt service, when you divide $1 by zero debt service, you end up with an error message in the spreadsheet.”
Sixel says the FAA used the number 25 in the formula where the error message occurred, which he says “ended up skewing the end numbers.”
“There are about a hundred [airports] that were in that category that received about $17 million because their reserves to debt service ratio was an error in the spreadsheet,” he added. Sixel said he didn’t believe such large payouts to select airports was the intent of Congress, but that “FAA was handed a curve ball and didn’t know what to do with it.”
Marcia Alexander-Adams, public affairs manager for FAA, said the allocation formula was put forth by Congress. “The current situation with how it’s calculated now is how it’s going to stand,” she said.
FAA notes that funds for operating expenses must be used within four years. Those airports with awards exceeding that amount could use the CARES Act money for a variety of purposes, including new terminals or other capital projects. “If you ended up with an additional 15 or $16 million, you’ll put it in the bank and you won’t be able to spend it on operating expenses,” Sixel noted. “But when you have a project that comes up in the next few years, a runway rehabilitation or taxiway, terminal, whatever it is, that is [Airport Improvement Program fund] eligible, the FAA will use that money that you received that are the cares funding first before they awarded any additional funding from the AIP program.”
AIP funds will not require a local match for grants issued in 2020, and in future years as long as CARES matching funds remain. After that, multi-year grands will revert to the normal sponsor share, typically that’s 75 percent from AIP and 25 percent from other sources.
But with the CARES Act providing funds that airports can use for various projects, including construction, “that will free up additional AIP money for other projects, so you could see a building boom in the next couple of years.”