Federal Funding By Any Other Name

Previously, we discussed Kansas City Aviation Department Director Mark Van Loh’s objection to local voters interfering with his $1.2 billion airport plans. He also took aim at the federal funding of airports, saying, “We want the government out of this.” His main complaint: airports are dependent on federal funds for maintaining or expanding capacity, but sequestration has meant there is less to go around. Van Loh wants Congress to increase another type of tax, the Passenger Facility Charge (PFC), which would make Kansas City International Airport (MCI) less reliant on other federal funds.

Most federal funds for airports come from two sources:  PFCs and the Airport Improvement Program (AIP). The AIP funds are distributed to airports on a needs basis. PFCs are collected per ticket and then given to airports based on each facility’s total passengers. This means that busy airports, such as MCI, stand to gain substantially if the PFC rate is increased. Van Loh wants the federal government to increase the rate on PFCs in return for large airports (like Kansas City’s) receiving fewer or no AIP grants. This means less federal funds based on need in exchange for more funds based on passenger level.

However, it is an unfounded assertion that if the PFC rate increases from $4.50 to $8, as Van Loh proposed, MCI would no longer need the federal government. First, the PFC is a federal tax, and as such, receiving PFCs is receiving federal aid, just in a different form. Second, assuming higher-priced tickets do not impact demand, Kansas City International Airport would have only received an extra $20 million in 2012 if the PFC rate was raised to $8 per ticket. From 2010 to 2012, Kansas City International Airport received an average of $20 million in AIP grants per year. A chart of AIP grants and PFCs for the last seven years shows this:

Therefore, exchanging more PFCs for lower AIP grants will not increase the airport’s income on average. It would, however, increase the stream of income immediately, helping to finance a new terminal in the short term.

Either way, the Kansas City Aviation Department is not getting the government out of its business.