sensible since capital investment issues should be resolved before major M&O commitments are undertaken. At the same time the sources of M&O funds must be more precisely specified in order to preclude another unfortunate tug of war between OMB and the users of the system. About 90 percent of the Trust Fund income has been raised by airline domestic passenger taxes. Assuming that most of the Trust Fund surplus were to be exhausted, a ticket tax of 4 to 5 percent on airline passengers would support those capital requirements which can now be foreseen. With defederalization of large and medium hubs, the ticket tax could be reduced to the 2 to 3 percent level. One of the most controversial financing issues has been the general aviation contribution. This is because the DOT Cost Allocation studies have used assumptions which force general aviation's fair share of the costs to a level which cannot be paid without serious impact on the general aviation system. This doesn't really make sense. General aviation is involved in the air transport system, it is part of U.S. leadership in aviation, it contributes to exports, and private flying is part of the American way of life. Bringing these factors into consideration requires greater subtlety than economic theory can handle. The solution, therefore, would be to arbitrarily credit general aviation with a certain level of public service contribution to be publicly funded-thus ending the long and fruitless debate. CONCLUSIONS The Airport and Airway Development Program is a key element in keeping the U.S. first in aviation. Therefore, the flow of capital investment from the Trust Fund into airports and airways must be resumed without further delay. The original concept of the program as a user supported capital investment program is sound and should not be compromised. The Trust Fund should be uncoupled from the appropriation process, as it originally was under the Act of 1970. The defederalization process could uncouple a substantial part of ADAP from the appropriation process, but legislation would be required to uncouple the remaining program elements. Unless dramatic progress can be made in resolving differences between airlines and airport operators on taxation and financing issues and defining the role of the states in airport development, capital investment in airports and airways will have to be resumed before defederalization legislation can be perfected. The funding levels proposed by the coalition of aviation industries are necessary and should be authorized. Airline domestic passenger taxes should be reduced to those levels required to sustain capital investment after the Trust Fund surplus has been exhausted. A public service credit should be arbitrarily set for general aviation and publicly funded. The M&O contribution from the Trust Fund should be kept at minimum levels until all capital investment issues have been resolved, and until firm long term arrangements for raising M&O funds have been established. I thank you for the opportunity to appear and will attempt to answer your questions. Senator KASSEBAUM. We will continue tomorrow morning with the rest of the witnesses on this legislation. Thank you very much. [Whereupon, at 12:38 p.m., the hearing was adjourned.] AIRPORT AND AIRWAY SYSTEM DEVELOPMENT ACT OF 1981 WEDNESDAY, FEBRUARY 25, 1981 U.S. SENATE, COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION, SUBCOMMITTEE ON AVIATION, The subcommittee met at 9:30 a.m. in room 235 of the Russell Senate Office Building, Hon. Nancy Landon Kassebaum (chairman) of the subcommittee) presiding. Senator KASSEBAUM. The hearing will come to order, please. If the panelists for the American Association of Airport Executives would present their testimony. Senator Cannon, do you have any opening statement? STATEMENT OF HUGH KELLEHER, PRESIDENT, AMERICAN AS- Senator KASSEBAUM. Good morning. Does everybody have a presentation they would like to make? Mr. KELLEHER. Just one. Senator KASSEBAUM. Mr. Kelleher? Mr. KELLEHER. Yes. Senator KASSEBAUM. And president of the American Association of Airport Executives. Mr. KELLEHER. Yes. Madam Chair, members, thank you for the opportunity to present our views on this important legislation destined to carry forward the basically sound Federal airport aid program into the decade of the 1980's. I am Hugh Kelleher, manager of the Helena Airport in Helena, Mont., and speaking this morning as president of the American Association of Airport Executives. With me is John Solomon, director of aviation of McCarran International Airport, chairman of our Federal Affairs Committee, and a past president of AAAE; Daniel Orcutt, executive director of the Indianapolis International Airport, an AAAE vice president; and Russell Hoyt, executive vice president. Membership of AAAE is made up of the individuals who manage the Nation's airports, airports that range in size from the largest hubs down through the medium and small to most of the nonhubs, as well as the busier reliever, commuter, and general aviation airports. Mr. Winant, speaking for the coalition of aviation organizations, presented to you the several points which the aviation community strongly believes should be included in the legislation that will continue the development and improvement of the Nation's airport and airways systems. The various segments that make up the aviation industry, both the users and providers, worked to develop a consensus cognizant of two critical needs: one, the significant financial resources required to maintain and expand the airport and airways system; and two, the overriding consideration of keeping total Government expenditures at a level to curb inflation and reduce Federal deficits. The authorization levels recommended by the coalition were developed only after careful examination both of the needs to meet the forecasted growth of aviation and of the user fees already on deposit in the trust fund, collected precisely for the purpose of meeting these needs. A number of exhibits have already been presented to you. These figures show a tremendous uncommitted surplus presently in the trust fund and projected revenues which, even based on the reduced level of user charges presently in effect, would finance all programs funded by the trust fund well into the mid-1980's. A review of the National Airport system plan will indicate that the recommended $875 million for ADAP in fiscal year 1982 is conservative. Included as an appendix to my statement are summary figures from the National Airport system plan. This summary clearly points out that the airport capital development needs for the decade of the 1980's total $12.67 billion. This figure is conservative, as it was developed in 1979. Improvement and expansion of the airways system is equally important. The coalition's recommendations include an increase in the F. & E. authorization. It is critically important that the airways system keep pace with aviation growth. In the appendix, we have included excerpts from the conclusions found in the national aviation system development and capital needs. It is important to note that both the airport and the airways system have suffered from inadequate infusions of development capital. We have a capacity crisis at several airports; we are rapidly approaching this problem at many others. There are those that recommend meeting this crisis by artificially restricting growth, thereby decreasing demand-and then regulating this demand through such exotic schemes as bidding for slots or administrative edict. We need only note the mess at National to know that these so-called solutions won't work. The answer to the congestion is to expand the system. To do this, increased levels of spending for both airways and airports is imperative. We have urged the adoption of the coalition's recommended $875 million for ADAP. There is a similar recommendation for increased authorization for airways facilities. Included in this increase is $20 million specifically for precision approach aids and related facilities at the smaller commercial service airports. The Airline Deregulation Act made it clear that the safety at the commuter service airports should be brought up to air carrier airport standards. This special $20 million set-aside would do more than anything else to effect such a safety improvement. We are all aware that the airport and airway bill expired last October. We were surprised, or rather shocked, to learn that despite the expiration of this act, all expenditures from the Aviation Trust Fund continue at levels stated in the fiscal year 1981 appropriations, except the airport aid development program. Funds for research and development, for airways facilities, and even for the operations and maintenance of the FAA are funded; only airport development aid is halted. We strongly urge that the Congress correct this obvious inequity by authorizing airport development funds, already appropriated, before the 1981 construction season is past. S. 508 provides for a more active role of the States in airport development. We are concerned that the end result may be just an increased layer of bureaucracy. However, we do recognize that a number of States without Federal incentives or directives are, and have been, doing an excellent job in offering technical and administrative assistance to airports, particularly the smaller ones. Therefore, if a State can demonstrate that it has the expertise and resources to handle ADAP for other than commercial service airports, then it should be authorized to do so. As was evident last year, the most controversial portion of S. 1648 was the removal of the top 72 airports from ADAP eligibility. Various arguments against making the larger airports ineligible have been advanced. We believe the most compelling reason why all public airports should remain in the program, in the short run at least, is that the traveling public and other airport users have already paid, through user taxes in effect since 1970, for considerable development that has not been accomplished. Air transportation users have been shortchanged. At the moment, approximately $3 billion of user taxes are being withheld in the trust fund. If an airport becomes ineligible for ADAP, it will, out of necessity, have to increase user fees. This will only mean that the public will be paying for airport improvements which it has already paid for through previous charges collected but not expended. The committee is presently giving serious consideration to modifying the present Federal prohibition against a passenger service charge. In our testimony on S. 1648 before this committee last year, we stated in part: Any defederalization of airports cannot go just part way. Removing airports from the Federal airport aid program is an important part of the defederalization process; an equally important part is the lifting or modification of the present Federal statute that will not permit an airport to generate revenue for airport operation and improvement through a passenger service charge. Airport management spoke out against the prohibition when proposed back in 1972. We could not understand, particularly in light of the Supreme Court decision, why or how the Federal Government would prohibit an airport from establishing a passenger service charge. During the intervening months between the court decision in the Evansville case in April of 1972 and the signing into law in June of 1973 of amendments to the Airport Act, some 40 to 50 airports used the passenger service charge to meet airport operating and capital development needs; and with one glaring exception, the level and collection of this charge posed no unreasonable burden on the passenger. This occurred while the passenger was simultaneously paying an 8 percent ticket tax. Included in the appendices of my statement is a paper entitled, "A Sensible Alternative to ADAP." This was prepared by us back when the airport defederalization issue was first raised. We know that the committee is under considerable pressure to make no modification on the present prohibition against the passenger service charge. Nevertheless, we believe that if defederalization is to be a reality, then it should be a clean break, so to speak; to permit a charge but only with many Federal conditions may prove cumbersome and unworkable. Other than a requirement that head-tax revenue be used strictly for airport purposes and collected by the airlines to avoid inconvenience, the lifting of the present prohibition should be unqualified. The proposed amendment of the Federal Aviation Act to insure a reasonable degree of suitable access to airports is, we believe, perhaps not necessary. The record, especially since airline deregulation, will indicate that airports have done a remarkable job of accommodating additional carriers and particularly the many new commuter operators. There is good reason for this; it is to the airport's and the community's best interest to do so. Admittedly, there have been isolated incidents where access has been difficult-usually there were extenuating circumstances as aircraft noise limitations-but these situations for the most part have been resolved. Any airport that may be defederalized has already accepted ADAP, therefore has given nondiscrimination, equal-access assurances that run for many years. These and the basic provisions of the Federal Aviation Act are, in our judgment, sufficient safeguards to assure equal airport access. The $1 million minimum 5-year guarantee for the smaller airports is an excellent feature of S. 508. The previous $150,000 annual minimum was a step in the right direction but unfortunately resulted in many small accounts not available to another airport and yet too small for the airport to undertake any capital improvement project. The Airport and Airways Development Act of 1970 played a significant role in permitting the airport and airways system to keep pace with the continual growth of aviation. Unfortunately, this program lapsed last October. We wish to commend this committee for so promptly addressing this rather complex issue and for moving toward markup and completed Senate action in the near future. [The attachment follows:] THE SENSIBLE ALTERNATIVE TO ADAP There is wide-spread agreement among both providers and users of airport facilities that the airport system would be a better one if the Federal Government were phased out of the planning and construction functions. The consensus is based on the realization that construction, for example, would move ahead much more rapidly, and at significantly lower costs, if the Federal Government were out of the decisionmaking process; also, that establishing priorities, with respect to which airport projects should be accomplished first, could be much more effectively determined by the users and providers at the local level as opposed to a determination on some nebulous monolithic national decision. Although the consensus is widespread on the desirability of getting the Federal Government out of the airport program, the consensus dissipates with respect to how airports, once out of the Federal program, would be able to generate additional revenues to make up for the loss of ADAP funds. |