The Passenger Facility Charge (PFC) program was established by the Aviation Safety and Capacity Expansion Act of 1990, which was signed into law on November 5, 1990. The legislation allowed the Secretary of Transportation to grant a public agency that controls a commercial service airport the authority to impose a local fee of $1, $2, or $3 per enplaned passenger.
The law requires airports to use PFC revenue for FAA-approved eligible projects that:
• “preserve or enhance capacity, safety, or security of the national air transportation system;
• reduce noise resulting from an airport which is part of such system; or
• provide an opportunity for enhanced competition between or among air carriers and foreign air carriers.”
To gain approval for a proposed PFC increase, airports must file an application with the FAA including the proposed PFC rate, collection period and aggregate amount to be collected as well as details of the projects on which PFC money will be spent. In addition to federal approval, airports as units of local government must have local support to proceed.
Ten years after Congress created the PFC program, lawmakers raised the federal cap on local PFCs to $4.50 as part of the Wendell H. Ford Aviation Investment and Reform Act for the 21st Century (AIR-21), which was signed into law on April 5, 2000. Large and medium hub airports that impose a PFC above a certain amount are required to “turn back” a portion of their federal funding, which in turn is used to help smaller airports finance their infrastructure projects.
While recent legislation has addressed some elements of the program, the federal cap on local PFCs has not been updated for 19 years – since 2000. During that time, construction cost inflation has eroded the value of the $4.50 to about half that amount. Meanwhile, the long list of airport infrastructure needs continues to grow. A PFC increase would help airports reconstruct aging facilities, enhance safety, and accommodate rising demand.
According to the FAA’s 2019 National Plan of Integrated Airport Systems, airports have $35.1 billion in Airport Improvement Program (AIP)-eligible projects over the next five years or more than $7 billion annually. Traditionally, airports receive less than half that amount through annual appropriations. Airports Council International – North America estimates that airports will have $128 billion in capital needs between 2019 and 2023 – approximately $25.6 billion annually for AIP-eligible and other necessary projects. That is more than three times the amount that airports received in traditional AIP funds and local PFC revenue every year.
Despite enormous needs, the FAA reauthorization bill that Congress passed in 2018 flat funded
AIP through Fiscal Year 2023. If the federal government is unable to provide additional resources for airport infrastructure development, local airports should have additional flexibility to do so on their own.
PFCs are Local User Fees not Taxes: The airlines often make the erroneous claim that PFCs are taxes. But PFCs are not taxes – they are local user fees that passengers pay to help defray the costs of building airport infrastructure. Moreover, PFCs are imposed by states or units of local government – not the federal government.
PFCs are not collected by the federal government, not spent by the federal government, and not deposited into the U.S. Treasury. They are collected by the airlines on behalf of airports and remitted directly to the airports on a monthly basis minus a handling fee of $0.11.
Raising the federal cap on local PFCs would simply give airports the option to increase their local PFC if they have meaningful projects and determine that the PFC is the best mechanism for paying for those projects. It does not require airports to pursue an increase.