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10.6 Financing Methods for the Recommended Development Program <br />General Discussion <br />The local funding share of airport improvements is <br />generally financed by one or a combination of methods. <br />The most commonly used methods are: (1) Financing by use <br />of accumulated funds, (2) Financing by Revenue Bonds, or <br />(3) Financing by General Obligation (G.O.) Bonds. <br />Accumulated Funds <br />The advantage of financing through the use of accumulated <br />funds is that if the existing funds are available, con- <br />struction can proceed readily. The airport sponsor is not <br />dependent upon the current state of the bond market for <br />financing its projects. This type of financing, however, <br />is generally suitable only for small or medium size pro- <br />jects. Most airports are not able to accumulate sufficient <br />funds to pay for large expansion projects without the use <br />of the bond market and/or State or Federal Grants. <br />Revenue Bonds <br />Airport Revenue Bonds are bonds secured by the revenues of <br />the airport. They have the advantage for a public <br />authority that they can usually be sold without submitting <br />them to taxpayer approval. This is because they will <br />presumably have either no or only a minor effect on taxes <br />since they will generally be paid for entirely out of air- <br />port revenues. These are generally limited to use at <br />larger airports where revenues exceed operating amd main- <br />tenance expenses and can be used for capital improvement <br />projects. <br />Revenue bond issues present a number of problems. The <br />major one is that they are more expensive, i.e., have <br />higher interest rates, than financing by tax backed mea- <br />sures. This is equitable since revenue bonds have more <br />risk involved in them than tax backed financing measures, <br />but it is generally undesirable for a public agency to pay <br />the increased costs if there are alternative methods of <br />financing. <br />Another problem is that revenue bonds require unusually <br />large reserves if there are no firm guarantees for repay- <br />ment. This can call for the net income (total revenues <br />less maintenance and operating expenses) available for <br />10-9 <br />