02-5635. Notice of Order Soliciting Community Proposals

AGENCY:

Department of Transportation.

ACTION:

Notice of order soliciting community proposals (Order 2002-2-11).

SUMMARY:

The Department of Transportation is instituting a new small community air service development program by soliciting an initial round of proposals from interested communities and consortiums of communities. On Thursday, February 28, 2002, the Department published this Notice in the Federal Register [67 FR 9351]. However, Order 2002-2-11, intended to be added as an attachment to this Notice, was inadvertently not published on February 28, 2002. The aforementioned Order has now been included and appears in full text as an attachment to this document.

DATES:

Proposals should be submitted no later than April 22, 2002.

ADDRESSES:

Interested parties should submit an original and five copies of their proposals, bearing the title “Proposal under the Small Community Air Service Development Pilot Program, Docket OST-2002-11590” as well as the name of the community or consortium of communities, and the legal sponsor, to the Docket Operations and Media Management Division, SVC-124, Room PL-401, Department of Transportation, 400 7th Street, SW., Washington, DC 20590.

FOR FURTHER INFORMATION CONTACT:

Matthew C. Harris, Special Assistant to the Assistant Secretary for Aviation and International Affairs, Department of Transportation, 400 7th Street, SW., Washington, DC 20590 [phone].

Dated: March 4, 2002.

Read C. Van de Water,

Assistant Secretary for Aviation and International Affairs.

DEPARTMENT OF TRANSPORTATION

Office of the Secretary

[Docket OST-2002-11590]

Institution of the Small Community Air Service Development Pilot Program under 49 U.S.C. 41743 et seq.; Order Soliciting Community Proposals

Issued by the Department of Transportation on the 13th day of February, 2002.

SUMMARY:

By this order, the Department is instituting a new small community air service development pilot program by soliciting an initial round of proposals from interested communities and consortiums of communities. Proposals should be submitted no later than 60 days after the date of service of this order to ensure priority consideration.

Background

On April 5, 2000, the President signed the Wendell H. Ford Aviation Investment and Reform Act for the 21st Century (AIR-21), P.L. 106-181. Among other things, the statute establishes a new pilot program designed to help smaller communities to enhance their air service. To fund the program, the statute authorized a funding level of $20.0 million for fiscal year 2001 and $27.5 million for each of fiscal years 2002 and 2003. (Financial assistance is not the only type of assistance under the program. For example, in appropriate situations, the Department can assist a community in trying to get joint ticketing and other “through” services from a network carrier at the connecting hub.) No funds were appropriated for the first year, but in the Department's FY 2002 appropriation bill, P.L. 107-42, Congress appropriated $20 million for the program. The statute directs the Secretary to assist communities in developing projects that will enhance their access to the National air transportation system through public-private partnerships, and to help communities overcome factors that might be inhibiting improvements in their current air service.^[1]

Specifically, the law authorizes the Secretary to provide financial assistance (direct financial assistance to an air carrier is limited to three years) to as many as 40 communities nationwide at any given time, though no more than four of those may be from the same state.^[2] While no community is required to contribute a portion or share of the cost of this program, the law directs the Secretary to give priority to those communities or consortia of communities where: (a) average air fares are higher than the air fares for all communities; (b) a portion of the cost of the activity contemplated by the community is provided from local, non-airport revenue sources; (c) a public-private partnership has been or will be established to facilitate air carrier service to the public; and (d) improved service will bring the material benefits of scheduled air transportation to a broad section of the traveling public, including businesses, educational institutions, and other enterprises whose access to the National air transportation system is limited.

Participation in the program will remain open and thus is not necessarily limited to those communities that initially apply for and receive funding. We would consider additional proposals over the balance of the program's life if funds remain unexpended.

Community Proposals

The new law is very general about how program funding can be used. Moreover, we recognize that each community's circumstances may be different, and that each community needs some latitude in identifying its own objectives and developing strategies for accomplishing them. What should remain clear, however, is that program funding is intended to improve air service to those communities that are not receiving sufficient air service or are experiencing unreasonably high air fares, and not to shift existing costs from the local or state level to the federal level.

There is a host of means by which a community might enhance its present air service or attract new service, such as: by promoting awareness among residents of locally available service; by attracting a new carrier through revenue guarantees or operating cost offsets; by offering an incumbent carrier financial incentives to lower its fares, increase its frequencies, add new routes, or deploy larger, faster aircraft, including upgrading its equipment from turboprops to regional jets. The core objective of the pilot program is to secure enhancements that will be responsive to a community's air transportation needs and whose benefits can be expected to continue after the initial expenditures.

Consequently, we encourage communities and consortiums of communities to consider a wide range of initiatives in developing their proposals. At the same time, we will not entertain general, vague, or unsupported proposals. Also, the more highly defined a proposal is, the more likely it will receive favorable consideration. At a minimum, we expect proposals to address the following areas specifically:

• A description of the community's existing air service, including service frequency, direct and connecting destinations offered, available fares, and equipment types.
• A synopsis of the community's historical service including destinations, traffic levels, service providers, and any extenuating factors that might have affected traffic in the past or that can be expected to influence service needs in the near to intermediate term.
• An analysis of the community's air service needs or deficiencies, including a comparison of fares currently offered at the community to those offered at similar communities in similarly served markets.
• A strategic plan for meeting those needs through the pilot program, including the community's specific project goal and a timetable for attaining that goal. As noted above, we expect that self-sufficiency of the new or improved service will be an integral part of the community's goal. Applicants should not assume a multi-year award. Moreover, many communities might find that a single funding award for one year would be sufficient to finance their projects, or resolve their service or fare issue.
• A description of the public-private partnership that will be responsible for the program developed at the local level. The partnership can either be an existing organization or an entirely new one. A public member of the organization should be identified as the community's sponsor to accept program reimbursements.
• An analysis of the funding necessary for implementation of the community's project, including the federal and non-federal contributions. In calculating the non-federal contribution, we anticipate that we would not recognize contributions that simply continue already-existing programs or projects; ideally, the contributions should represent new financial resources devoted to attracting new or improved service, or addressing a specific high-fare issue. Furthermore, while we will consider proposals that employ in-kind trading (for example, reduced landing fees or terminal rent or non-cash transactions such as free advertising in exchange for reduced-fare travel), as a general matter, in-kind trading is frequently hard to quantify and may put a community at a competitive disadvantage when compared to other communities whose proposals include straight cash contributions.
• An explanation of how the community will provide assurances that its own funding contribution is spent in the manner proposed.
• Descriptions of how the community or consortium of communities will monitor the success of the program and how they intend to notify the Department of critical milestones during the life of the program, including the need to modify, or discontinue funding.
• We are not encouraging proposals that rely primarily on diverting passengers for whom a neighboring airport would be most convenient. Rather, we would encourage proposals that attempt to stimulate new demand at the local airport and make that service more attractive such that local passengers would no longer have the incentives to drive to a more distant airport. Proposals should clearly identify the target audience of all advertising and promotion efforts.

Proposals are due 60 days after the date of service of this order.^[3] Proposals filed after that date will be accepted, but those filed within the 60-day period will be given priority consideration.

Department Review

The Department will carefully review each proposal and the staff may contact applicants and discuss their proposals with them if clarifications or more information is needed. At that time, the communities will have an opportunity to amend their proposals. Department staff will then review the final proposals before recommending appropriate action for final consideration.

In general terms, our review will focus on the following questions:

• Is the community truly experiencing insufficient air service or higher than average air fares when compared to similar communities?
• Does the proposal represent the best and most efficient method of meeting that need, given the community's circumstances?
• Are the community's objectives attainable during the funding period requested? Is there a realistic prospect that the enhanced service—in terms of quantity, quality, or price—could be sustained beyond the end of the funding period?
• Is there low-fare service within a reasonable distance of the community that may affect the potential for the community's project to be successful?
• Has a public-private partnership been identified to be responsible for the program at the local level? Has a public agency or organization been identified as the local sponsor to serve as a clearinghouse to submit reimbursement requests and receive program funding from the Department? Have protections been established to ensure that money intended for this project cannot be diverted to other uses?
• Is the requested funding level appropriate for the project being proposed? Has the community proposed an acceptable method to modify or suspend the requested funding prior to the end of the planned funding period if the project is not attaining the desired results?

Interested communities should submit an original and five copies of their proposals, bearing the title “Proposal under the Small Community Air Service Development Pilot Program” as well as the name of the community or consortium of communities, the legal sponsor, and the docket number as shown on the first page of this order, to the Docket Operations and Media Management Division, SVC-124, Room PL-401, Department of Transportation, 400 7th Street, SW., Washington DC 20590. Questions regarding the new program or the filing of proposals should be directed to Matthew C. Harris, Special Assistant to the Assistant Secretary for Aviation and International Affairs, at [phone] or [e-mail].

This order is issued under authority delegated in 49 CFR 1.56a(f).

Accordingly,

1. Community proposals for funding under the Small Community Air Service Development Pilot Program should be submitted no later than 60 days after the date of service of this order. Subsequent proposals will be considered on an ad hoc basis; and

2. This docket will remain open until further order of the Department.

This order will be published in the Federal Register.

Read C. Van de Water,

Assistant Secretary for Aviation and International Affairs.

Appendix A

Sec. 203. Improved Air Carrier Service to Airports not Receiving Sufficient Service

(a) In General—Subchapter II of chapter 417 is amended by adding at the end the following:

Sec. 41743. Airports not receiving sufficient service

(a) Small Community Air Service Development Pilot Program—The Secretary of Transportation shall establish a pilot program that meets the requirements of this section for improving air carrier service to airports not receiving sufficient air carrier service.

(b) Application Required—In order to participate in the program established under subsection (a), a community or consortium of communities shall submit an application to the Secretary in such form, at such time, and containing such information as the Secretary may require, including—

(1) An assessment of the need of the community or consortium for access, or improved access, to the national air transportation system; and

(2) An analysis of the application of the criteria in subsection (c) to that community or consortium.

(c) Criteria for Participation—In selecting communities, or consortia of communities, for participation in the program established under subsection (a), the Secretary shall apply the following criteria:

(1) Size—For calendar year 1997, the airport serving the community or consortium was not larger than a small hub airport (as that term is defined in section 41731(a)(5)), and—

(A) Had insufficient air carrier service; or

(B) Had unreasonably high air fares.

(2) Characteristics—The airport presents characteristics, such as geographic diversity or unique circumstances, that will demonstrate the need for, and feasibility of, the program established under subsection (a).

(3) State Limit—No more than four communities or consortia of communities, or a combination thereof, may be located in the same State.

(4) Overall Limit—No more than 40 communities or consortia of communities, or a combination thereof, may be selected to participate in the program.

(5) Priorities—The Secretary shall give priority to communities or consortia of communities where—

(A) Air fares are higher than the average air fares for all communities;

(B) The community or consortium will provide a portion of the cost of the activity to be assisted under the program from local sources other than airport revenues;

(C) The community or consortium has established, or will establish, a public-private partnership to facilitate air carrier service to the public; and

(D) The assistance will provide material benefits to a broad segment of the traveling public, including business, educational institutions, and other enterprises, whose access to the national air transportation system is limited.

(d) Types of Assistance—The Secretary may use amounts made available under this section—

(1) To provide assistance to an air carrier to subsidize service to and from an underserved airport for a period not to exceed 3 years;

(2) To provide assistance to an underserved airport to obtain service to and from the underserved airport; and

(3) To provide assistance to an underserved airport to implement such other measures as the Secretary, in consultation with such airport, considers appropriate to improve air service both in terms of the cost of such service to consumers and the availability of such service, including improving air service through marketing and promotion of air service and enhanced utilization of airport facilities.

(e) Authority to Make Agreements—

(1) In General—The Secretary may make agreements to provide assistance under this section.

(2) Authorization of Appropriations—There is authorized to be appropriated to the Secretary $20,000,000 for fiscal year 2001 and $27,500,000 for each of fiscal years 2002 and 2003 to carry out this section. Such sums shall remain available until expended.

(f) Additional Action—Under the pilot program established under subsection (a), the Secretary shall work with air carriers providing service to participating communities and major air carriers (as defined in section 41716(a)(2)) serving large hub airports (as defined in section 41731(a)(3)) to facilitate joint-fare arrangements consistent with normal industry practice.

(g) Designation of Responsible Official—The Secretary shall designate an employee of the Department of Transportation—

(1) To function as a facilitator between small communities and air carriers;

(2) To carry out this section;

(3) To ensure that the Bureau of Transportation Statistics collects data on passenger information to assess the service needs of small communities;

(4) To work with and coordinate efforts with other Federal, State, and local agencies to increase the viability of service to small communities and the creation of aviation development zones; and

(5) To provide policy recommendations to the Secretary and Congress that will ensure that small communities have access to quality, affordable air transportation services.

(h) Air Service Development Zone—The Secretary shall designate an airport in the program as an Air Service Development Zone and work with the community or consortium on means to attract business to the area surrounding the airport, to develop land use options for the area, and provide data, working with the Department of Commerce and other agencies.’.

(b) Conforming Amendment—The analysis for subchapter II of chapter 417 is amended by adding at the end the following: 41743. Airports not receiving sufficient service.’.

Appendix B

Small Community Air Service Development Pilot Program Grant Application

General, Review Criteria, Deadline

Congress recently approved a new Federal program within the Department of Transportation to assist small communities with efforts to address scheduled air service deficiencies. The Department of Transportation's Office of Aviation and International Affairs has been assigned the responsibility to design and implement this new program in such a way as to help local communities implement air service development strategies to address a variety of issues related to high air fares and poor service. At the heart of the new program is a scaled grant-in-aid formula similar in some respects to the grant allocation formula used by the Federal Aviation Administration to administer the Airport Improvement Program. In order to participate in the Pilot program, a community, or a consortium of communities, must submit a Grant Application, described below. Once the Application has been reviewed, the Department will issue a proposed Grant Offer and Grant Agreement to each airport, community, or consortium of communities selected for inclusion in the program.

The Department's selection of those airports and communities to be included in the Pilot Program will be based on the following objective criteria and none other:

• Relative size of each applicant community;
• Geographic location of each applicant;
• Grant amount requested compared with total funds available for all communities;
• Proposed federal grant amount compared with local share offered;
• Uniqueness of applicants' claimed problem(s); and
• Relative ability of applicant to resolve or address claimed problem(s).

An original and five copies of each application should be submitted by the end of the 60-day period commencing with the date of service of this order. Applications that are submitted after that date, or applications that are incomplete, will be considered for inclusion in the program only if funds remain after all other successful pending applications have been funded. If an incomplete or incorrect application is submitted early in the 60-day period, the DOT staff will contact the applicant and provide the applicant an opportunity to complete or correct the application.

Grant Application, Grant Offer and Grant Agreement; When To Proceed

Because each airport community's needs are different, the Department expects to see a variety of grant-in-aid requests. There is no exact format to follow or form to fill out per se. Each community should submit an application containing as much detail as possible, both to describe the recent history of local air service, efforts on the part of the community to address service deficiencies, the current service situation, and the service issues and opportunities assistance from the Federal government will help to address.

Please be aware that applicants should not assume they have received a grant-in-aid until they have received and executed a Grant Agreement. All grant funds are provided on a reimbursable basis and only for expenses incurred and billed during the period the Grant Agreement is in effect. There can be no exceptions.

Who Is Eligible to Participate in This Grant Program?

This is a grant-in-aid program designed to help local communities deal effectively with actual air service problems or opportunities. By P.L. 106-181, in order to be eligible, the airport serving the community or consortium was a small hub or nonhub airport in calendar year 1997. (49 U.S.C. 41743(C)(1).) The recognized owner or operator of any public-use airport in the United States may submit a Grant Application. In addition, a local chamber of commerce, an air service task force, or a similar organization or group of local organizations may serve as the “unofficial” sponsor as long as a local government unit executes the Grant Agreement as a co-sponsor on behalf of the local non-public organization.

What should the application consist of?

• A cover letter describing the Grant Request, the sponsoring government entity and any co-sponsors;
• Airport operating budgets for the previous two years showing revenues and expenses. Expenses and revenues should be broken down on an object basis according to GAAP.
• Airport operating budget for the current fiscal or calendar year showing planned expenses and anticipated revenues;
• Air Service Development Action Plan—general description, including as much detail as possible.
• What is the primary objective of your plan?
• What do you hope to accomplish: upgraded service, new hubs, more airlines, lower fares, more frequent flights, etc.?
• What do you not expect to accomplish with this grant?
• If you intend to conduct a study(s) as a portion of your action plan, what type will you conduct: deficiency studies, ticket lift surveys, parking lot studies, zip code studies, passenger surveys, demographic comparisons, fare analyses, traffic bleed analyses, other?
• Will you hire to fill any full-time equivalent position(s) to carry out the action plan now or in the future?
• Will you make use of local universities in any travel-related surveys?
• Do you expect to hire or employ any type of consulting firm or public-relations firm to assist you?
• If you have an existing Action Plan that a Federal grant from this program will assist, show existing funding sources and amounts, and describe the existing program with sufficient detail to explain or define the past, the current situation, and any existing 5-year, 10-year, and 20-year plans.
• If this is a new program, what are the immediate, mid-term, and long-term goals?
• Does the airport have an existing master plan or airport layout plan that details any airside or groundside capacity-related projects that must be completed or will be required if the airport is successful in reaching its goal?
• Are Federal AIP funds currently obligated, through a Letter of Intent or otherwise, for any Federal-eligible project identified above?
• What is the construction time-line of all Federal-eligible projects identified above?
• How should the effectiveness of your Action Plan be measured?
• Budget for near-term (immediate to five-year) air service improvement strategies—immediate action plan
• Anticipated local share
• Actual funds from all sources, including local government (budgeted amount, current, and projected for the proposed life of the Grant Agreement), local businesses and organizations (contributions), airlines, airport users.
• Value and description of in-kind services.
• Anticipated state contribution
• Actual funds from current programs
• Anticipated new funds for this program
• Expected Federal contribution
• Budget request
• Total of all Funds Available for Action Plan
• Projected budget for mid-term and long-term (5-year and beyond) Air Service Improvement Strategies
• Expected local contribution
• Actual funds from all sources, including local government (budgeted amount, current and projected for the proposed life of the Grant Agreement), local businesses and organizations (contributions), airlines, airport users.
• Value and description of in-kind services
• Expected state contribution
• Actual funds from current programs
• Anticipated new funds for this program

How Can Pilot Program Funds Be Used?

Pilot Program funds can be used to cover the expenses of any new advertising or promotional activities that can reasonably be related to improving the scheduled air service to the community. Funds may be used for any type of new media advertising; for new studies designed to measure air service deficiencies, or to measure traffic loss or bleed to other communities; for new expenses associated with conducting promotional activities; and for the employment of new dedicated air service development staff on a long-term basis, advertising or public relations agencies, universities, and consulting firms.

Design of Pilot Program

This Small Community Air Service Development Pilot Program is designed to help individual communities address a variety of service issues. Indeed, because air service problems can run the gamut of issues from low frequency and wrong equipment to high fares and wrong markets, there is no one program that will be “right” for every community. Certain things are well known, however, that will allow the Department to channel the limited grant resources in this Pilot Program to those communities where it will do the most good.

Why Are Large and Medium Hubs not Included in the Pilot Program?

Congress limited eligibility to small hubs and smaller airports based on calendar year 1997 designations.

What Is an Appropriate Local Share of the Project's Cost?

A local share is not required to receive a grant under the Pilot Program, although it will be considered a positive element. To the extent that a grant under this program would enhance a community's ongoing effort to improve its local air service, a local share would be appropriate and may help the Department to extend the benefits of the program to a larger pool of communities. We would anticipate that larger airports would seek a larger grant amount and submit proposals showing a larger local/state share.

Grant Application Checklist

• Airport and community name

Address

Contact person w/phone number

• Additional community members

Addresses

Contact persons w/phone numbers

• Project Sponsor (If different from above)

Address

Contact person w/phone number

• Project Proposal
• Project description
• Project duration
• Project elements
• Project Cost
• Local share
• Public funds
• Private funds
• State share
• Federal share
• Total Cost $___
• Proposed evaluation criteria

Footnotes

1.  See Appendix A for the actual text of the authorizing statute.

2.  The statute specifies that a consortium of communities should be considered as a single entity.

3.  See Appendix B for additional application information.