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The CARES Act and Capital Program Strategy

April 23, 2020      

Tags: Aviation

With the announcement of $10 billion made available to U.S. airports through the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), airports are contemplating their overall financial strategy while the Federal Aviation Administration (FAA) puts together the process for paying out these grants.

A little more about the FAA’s process is known every day. On Monday, the FAA issued guidance that, while CARES Act funds never expire, all CARES Act grants must be drawn down within 4 years. Congress specifies that funds can be used for any legal airport-related purpose, as laid out in the FAA’s Revenue-Use Policy. The FAA has also decided that the initial grant to an airport will be based on annual operational costs incurred after January 20 of this year.

For some airports, CARES Act funds will be quickly utilized for operational expenses, but it may be prudent for some airports to position for potential future stimulus grants for capital projects and all airports to also consider maximizing FAA 2020 Airport Improvement Program (AIP) grants. With the CARES Act, any FY2020 AIP grant already issued from the FAA will be amended to make them 100-percent federally funded.

If fiscally practical, undertaking projects in a down market has advantages, from lower costs due to increased competition, aggressive pricing and lowered material costs, to faster construction when facilities are not operating at or near full capacity.

More Money on the Way? Be Shovel-Ready

Looking at prior recessions, it’s safe to assume that the CARES Act is just the first wave of federal funding for airports. Many expect several rounds of federal assistance including a round of stimulus money for recovery.

One way additional help could arrive is in the form of the American Recovery and Reinvestment Act (ARRA) in 2009. The ARRA provided $1.1 billion for airport development, with the purpose to reignite employment in the construction industry. “Shovel-ready” projects were one of the stated goals of the statute. Not only were projects with a higher National Priority Ranking (60-plus) targeted, but lower priority projects were also funded. Being shovel-ready was the key to receiving ARRA funding, and the same may prove to be true for a future stimulus program.

Next Steps for Airports

The 2020 AIP funding grant cycle is in full swing – all 2020 AIP grants must be awarded and accepted prior to September 30. Under new deadline announced by FAA, airports must notify the FAA of intent to use their entitlements by May 4. Formal application to the FAA must be completed by June 15 to secure an AIP grant. Because some airports may not be ready or willing to use their entitlement allocation this year, there may be additional discretionary funds available to airports who are ready to use the additional funds. Coordination with the Airports District Office (ADO) is essential to move additional projects into an airport’s FY2020 program.

Meanwhile, CARES Act funding can be used for design work and environmental studies to get future grant-funded projects shovel-ready.

If your airport has a project that is still in the grant application process, please understand that your ADO may allow you to add additional entitlement-funded items to this year’s grant application. For a project that is already designed but waiting for the next fiscal year for construction, you may be able to work with your ADO to accelerate the process to take advantage of funding opportunities this year. Early coordination with the FAA is extremely important.

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