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Statement of Robert J. Kelly,
Director of Aviation,
on behalf of
The Port Authority of New York and New Jersey
before the
The National Civil Aviation Review Commission
May 28, 1997

I welcome the opportunity to share the views of The Port Authority of New York and New Jersey on the future funding of the national air transportation system.

The Port Authority was formed in 1921 by the States of New York and New Jersey to promote and protect the commerce of the bistate port district, encompassing an area roughly within 25 miles of the Statue of Liberty. The agency today operates a multimodal system of facilities including bridges, tunnels, mass transit, maritime and the World Trade Center as well as John F. Kennedy, LaGuardia and Newark International Airports.

The Port Authority has no power to levy taxes or to make assessments. As a financially self-sustaining agency, it has no power to borrow on the credit of either state. Its capital development program is funded through user charges and the issuance of bonds. The Port Authority financial system operates on a consolidated basis with all funds flowing into a single pool of revenues.

The Port Authority operates Kennedy and LaGuardia airports pursuant to a lease with the City of New York and Newark airport is leased from the City of Newark. As of December 31, 1996, the Port Authority’s investment in the airport system totaled

$2.482 billion on a fully amortized basis. During 1996 some $253 million was invested as part of a multi-year capital investment program to modernize and redevelop the three airports. A $700 million redevelopment program at LaGuardia is in its final stages.

At Newark, a new 15-gate international arrivals facility opened in 1996 as did a monorail service linking the airport’s three passenger terminals, parking lots and car rental stations. Work has begun to link the monorail with the nearby Amtrak and suburban commuter rail system. A major runway extension is about to begin which will significantly reduce delays and save the airlines millions of dollars each year in operating costs.

At Kennedy International, substantial advances were made in the nearly $5 billion multi-year development plan which is being funded over the next five years by the Port Authority, the airlines and other private sector participants. The first new passenger terminal in over 25 years will open next year and a private developer has just assumed operation of the former International Arrivals Building and will construct a 1.4 million square foot facility on the site while the existing terminal remains in operation with completion slated in 2001. Plans are moving ahead on another vital element of Kennedy’s redevelopment--a $1 billion Light Rail System that will link the airport’s nine terminals and then connect to the City’s subway system.

This brief synopsis of our airport capital development program clearly demonstrates the Port Authority’s commitment to serving the needs of the traveling public as well as shippers. Yet the nation’s commitment to fulfilling its obligation to fund the national air transportation system is waning. In the 11-year period from 1982 when Congress passed the Airport and Airway Improvement Act and the FAA’s authorization to the Port Authority to impose a Passenger Facility Charge, enacted by Congress as a provision of the Aviation Safety and Capacity Act of 1990, the Port Authority received some

$408.6 million from the AIP program. However, since the peak year of 1992, when we received $52.3 million in entitlement and discretionary funding, AIP funding has fallen dramatically to $31.3 million before the 50 percent give-back required under the PFC program, a drop of over 40 percent. The 1996 AIP grant of $15.7 million amounted to a little more than 6 percent of our $253 million capital program last year. We have requested some $24.5 million in apportionment and discretionary funds for the current fiscal year but we have not received any grant yet.

We are not overly optimistic about receiving our full request in view of the Administration’s budget request for only a $1 billion AIP program this year. It is likely that the program and our AIP grant will shrink even further this year and probably in the years ahead unless Congress appropriates funds commensurate with aviation tax collections and aviation program needs. Moving the trust fund off-budget and dedicating user fees to the purposes for which they were intended would help make that possible. Additionally the aviation excise tax program (or some other reliable, adequate source) must be made permanent although the make-up of these taxes should be reviewed for fairness and equity. It is also critical that FAA have a stable funding source for its F&E, R&D and operations accounts.

We need a more adequate source of funding to ensure our ability to meet our airports’ capital needs and we therefore support an increase in the Passenger Facility Charge cap. The Port Authority imposed a $3 PFC per enplaned passenger at the three airports effective October 1, 1992. As of July 1995, the FAA authorized us to collect up to an aggregate of $846 million, net of air carrier handling charges. As of November 1996, the FAA also approved PFC expenditures of $421 million on the Newark monorail and its off-airport connection as well as various airport access studies. As of December 31, 1996, total cumulative investment provided by PFCs in connection with the ground access projects amounted to $163 million and the amount available for future PFC projects was $266 million. This roughly one-quarter billion dollar pool, while substantial, falls far short of meeting our multi-year capital investment program need.

Last year our airports handled a record 81 million passengers, some 3.4 million more than the previous year. By 2007 we expect this number to rise to 107 million passengers, or about 32 percent more traffic than we handle today. The Port Authority submits it is essential that adequate sources of funding be made available to permit us to undertake the capital investments needed to meet this demand and that the Federal Aviation Administration also be provided the funding necessary to upgrade its facilities and equipment and to adequately staff its air traffic control function.