3. Tax-exempt bonds.
4. State and local grants.
5. State and local airport operating revenue from tenant lease and other revenue-generating activities.

Small airports are usually more dependent on AIP grants for their capital needs, compared to large- and medium-hub airports. Large airports rely more on tax-exempt bonds, or finance capital projects with the proceeds from PFCs. Different combinations of these sources (AIP funding, PFCs, tax-exempt bonds, state and local grants, and airport revenues) are used to finance projects, depending on each airport’s financial situation and the project being considered (Dempsey 2008, Tang 2019). In a 2015 study, the U.S. Government Accountability Office (GAO) found that capital spending at airports was financed by airport-generated net income at 38%, AIP at about 33%, and PFCs at around 18%. Capital contributions by a sponsor, such as a state, municipality, airline, or tenant, were financed at around 6% and state grants at almost 5% (GAO 2015).

Private sector financing is a common emerging theme in airport financing given its profound advantages in transferring the risk of long-term operations and maintenance. It contractually binds a private party to ensure long-term operations and maintenance based on depicted, pre-negotiated performance requirements, with less liability to the public sector [American Society of Civil Engineers (ASCE) 2017]. Such a public-private partnership (P3) setting also ensures the developer looks at design with a life-cycle approach to minimize operations and maintenance costs. With public agencies retaining safety and regulatory oversight, it reduces the possibility of deferred maintenance, as that would have negative implications for the developer (Rapoport 2018).

Budget Prioritization Process. Airports have been successfully using existing systems to focus on managing their main assets, primarily pavements. Pavement management systems aid decision-makers in setting priorities, allocating resources, and systematically distributing funds. They also offer life-cycle cost analysis by considering different maintenance options (Moayedfar and Sajjadifard 2021). The literature review revealed that there is limited research addressing budget prioritization at airports. The studies found were mostly related to highways. For example, a study conducted on Virginia Department of Transportation bridges was focused on improving the process of allocating bridge maintenance resources in their programs and helping decision-makers effectively allocate the maintenance budget. The bridge prioritization methodologies developed utilized statistical and probabilistic risk analyses when identifying the attributes for evaluating bridges (such as average daily traffic and bridge condition). In addition to maintenance, economic and political attributes supported by sensitivity analyses were also included to prioritize bridge portfolios (Gokey et al. 2009). Such a tool could be generalized to other infrastructure, including airports.

2.2 Airport Asset Management

ACRP Report 69: Asset and Infrastructure Management for Airports—Primer and Guidebook prepared a guidebook for overall airport asset and infrastructure management (GHD Inc. 2012). This guidebook is composed of case study examples of various airports’ asset management programs and their relationships with daily operations and management and longer-term capital investment planning. It also covers asset management strategies, as well as asset information and data system requirements for an efficient plan. The guidebook explains how to consider asset life-cycle costs when making an investment plan. It also proposes a performance management framework for an asset management system; performances are monitored and managed from a whole-of-airport standpoint, and at asset level.

In addition, a framework has been developed to prioritize capital asset rehabilitation and replacement decisions for transit agencies (Spy Pond Partners, LLC et al. 2012). TCRP Report 157: State of

Good Repair: Prioritizing the Rehabilitation and Replacement of Existing Capital Assets and Evaluating the Implications for Transit is a guidebook that can be used by asset managers for prioritization of new and rehabilitation projects. The guide has seven steps: (1) collect asset condition and performance data, (2) analyze data, (3) identify rehabilitation and replacement alternatives, (4) define investment scenarios, (5) prioritize projects, (6) develop an investment plan, and (7) implement the plan. Using these steps, transit agencies can select projects that best achieve their goals.

ACRP Research Report 172: Guidebook for Considering Life-Cycle Costs in Airport Asset Procurement highlights the importance of understanding, integrating, and evaluating the total cost of ownership in the procurement of assets (Fortin et al. 2017). This guidebook is helpful for procurement personnel (personnel responsible for purchasing assets) to determine how to consider life-cycle cost in addition to initial purchasing cost. Airports need to use an asset’s total cost of ownership (TCO), which includes operations and management costs. The report developed an Excel-based tool that can be used by purchasing officers to determine the TCO of alternative assets during the bidding phase.

Further, ISO 55000 (2024), an international standard related to asset management principles, can also be used in airport asset management. According to ISO 55000, the objectives of any organization’s asset management depend upon the nature and purpose of the organization, along with its operating context, financial constraints, and regulatory requirements, as well as the needs and expectations of its stakeholders. These factors must be considered when establishing and implementing an asset management plan. It states that asset management is based on three fundamentals: (1) asset value, (2) alignment, and (3) leadership. Every organization values its assets and needs to focus on the value the asset can provide them, rather than the asset itself. According to ISO 55000, “Good asset management translates organizational objectives into technical and financial decisions, plans, and activities.” Organization leaders must value the creation, implementation, and improvement of their asset management systems. The major components of an asset management system are as follows:

• Organizational context,
• Leadership roles,
• Asset management planning,
• Organizational support,
• Asset management plan implementation,
• Asset performance evaluation, and
• Continuous improvement of an asset management plan.

2.3 Preventive and Deferred Maintenance

Public and private agencies can use various types of maintenance to keep their assets in good condition. Maintenance can be categorized into two types: proactive maintenance and reactive maintenance (Upkeep 2021). Proactive maintenance is planned maintenance, in which assets are maintained based on time used or predictive deterioration models. One of the main proactive maintenance types is preventive maintenance, which can increase asset life. In preventive maintenance, maintenance tasks are scheduled based on time used or with deterioration trends, rather than actual conditions. Sometimes, preventive maintenance is called routine maintenance. Another type of proactive maintenance is predictive maintenance, in which the maintenance tasks are scheduled based on actual asset conditions. Note there is significant variation between different industries and agencies concerning how these terms are used and how specific maintenance activities are classified.

Reactive maintenance is performed when assets need immediate maintenance that is not planned. There are two types of reactive maintenance: (1) emergency maintenance; and (2) corrective

maintenance. “When an asset requires immediate attention in order to keep a facility operational or safe,” reactive maintenance is used (Upkeep 2021). Corrective maintenance is generally conducted when the assets need corrective actions, rather than replacement. This is also a part of emergency maintenance.

In industry, maintenance is frequently deferred due to a lack of resources, so organizations generally delay the preventive maintenance of assets which adds to backlog. This is called deferred maintenance. Many organizations are using a “run-to-fail” approach for their assets due to a lack of funds and human resources (Penny 2018). A common rule of thumb is that a run-to-fail approach can cost 3 to 10 times as much as an approach that emphasizes proactive maintenance. Therefore, research has found deferred maintenance to be very expensive for owners.

ACRP Report 138: Preventive Maintenance at General Aviation Airports Volume 1: Primer is a primer on the importance of preventive maintenance programs for airport assets (Ploeger et al. 2015a). The report includes a guide that can be used by airport asset and maintenance managers to plan, prioritize, and conduct preventive maintenance. According to the report, airport maintenance is generally divided into four types: (1) operational, (2) reactive, (3) preventive, and (4) predictive. Some maintenance activities are related to airport operations, including removing ice, fixing lights, cutting grass, sweeping pavement, maintaining escalators and elevators, and more. These operational activities are also driven by regulatory and airfield safety requirements, as provided in FAA advisory circulars. Note that a maintenance strategy that relies exclusively on reactive maintenance is equivalent to the “run-to-fail” approach described above. An HVAC system that is not regularly maintained and is used until it fails and needs replacing is one example. However, a strategy that includes preventive maintenance consists of scheduled asset maintenance activities that collectively extend asset life. Generally, in preventive maintenance, the maintenance schedule is prepared based on the number of hours an asset is used. Preventive maintenance reduces the life-cycle cost and improves user satisfaction. On the other hand, predictive maintenance requires assets’ conditions to be monitored, and, based on these conditions, maintenance tasks are scheduled. For example, some airports monitor and detect the symptoms that can predict system failure and work to proactively increase the life of vehicles or equipment.

According to ACRP Report 138: Preventive Maintenance at General Aviation Airports Volume 2: Guidebook, airports need to prepare a preventive maintenance program that consists of the following components (Ploeger et al. 2015b):

• Prepare guiding principles of a preventive maintenance program;
• Maintain an inventory of airport assets;
• Assess asset conditions;
• Identify and schedule preventive maintenance tasks;
• Prioritize the preventive maintenance of assets based on safety, economics and operations, regulatory and FAA grant assurance requirements;
• Obtain the resources for preventive maintenance; and
• Implement a preventive maintenance program.

One of the obligations for any airport is to obtain airport operating certification from the FAA. 14 CFR Part 139 requires any airport that serves scheduled and unscheduled aircrafts with more than 30 seats, and air carrier operations in aircrafts with more than nine seats but less than 31 seats, to have a certificate (FAA 2021). This certification provides proof that the airport ensures safety in air transportation. To receive this certificate, airports must fulfill certain operational and safety standard requirements set by the FAA. To verify whether airports are meeting certificate requirements, FAA airport certification safety inspectors make inspections every year. During inspections, the review includes, but is not limited to, the following:

• Meeting with various airport personnel.
• Reviewing airport files and paperwork including, but not limited to, FAA Form 5010, Airport Certification Manual/Specifications, and Notices to Airmen (NOTAM).
• Checking the runway, pavement conditions, markings’ lighting, signs, vehicle operations, jet or propeller blasts, and wildlife presence.
• Inspecting aircraft rescue and firefighting.
• Inspecting fueling facilities.
• Conducting a night inspection.
• Having a post-inspection briefing with airport management.

Due to Part 139’s requirements for any assets related to the safety and security of the airport’s operations, the airport needs to maintain these assets in very good condition. Therefore, most airports keep inventory and condition assessments of assets inspected by the FAA to obtain airport certification, as well as those needed to meet the requirements for an FAA grant. All airports should have up-to-date records of these assets, as FAA inspectors can conduct inspections at any time of the year.

Airports need to have proper maintenance strategies to reduce downtime, so that customers can be served quickly, safely, and efficiently. A diligent workforce, as well as a robust computerized maintenance management system (CMMS), are needed to align the maintenance activities of airport assets (Eagle 2021). The main tasks of CMMSs are to:

• Manage asset and spare parts inventory,
• Record asset condition data,
• Plan and schedule maintenance tasks,
• Track and manage maintenance work orders,
• Track asset performance, and
• Comply with airport safety and environmental regulations.

Due to a lack of funds and human resources, an organization may have to defer maintenance of its assets. Organizations do not want to defer maintenance because it will reduce asset life, as well as increase asset life-cycle costs. Research has shown that investing $1 in pavement preventive maintenance at the appropriate time can save $4 to $10 in future costs (Agile Assets 2021). Therefore, if the pavement is not maintained, it will cost users more than its maintenance cost. One article making the case for spending more on infrastructure maintenance stated that “deferring maintenance makes fixes more expensive later” (Olson and Wessel 2017). It has been found that, due to bad pavement conditions, “the extra car repairs are equivalent to somewhere between a 50 cent to $1 tax per gallon of gasoline” (Olson and Wessel 2017). Therefore, it was suggested that all gas tax revenues be invested to repair, rehabilitate, and reconstruct existing roads and bridges. Literature has shown that deferred maintenance has negative consequences on the life of assets, which will increase assets’ life-cycle costs. However, little research has been done to quantify the consequences of deferred maintenance on any type of asset. The Geaslin Group developed an inverse-square rule-of-thumb for deferred maintenance efforts (The Geaslin Group 2021). The rule states that “if a part is known to be failing but operated to failure (OTF), the resultant energy required to overcome the breakdown event to the entire organization will be the square of the cost of the primary failure part. If the breakdown event escalates, the energy required to recover from the breakdown will continue to square at each successive level of failure.” An example of a car’s brake shoe failure was used, with the study explaining that, if the brake shoe, costing $40, is not replaced on time, then it can cause an accident, which could cost $1,600 ($40 square) in mechanical and towing expenses. If $1,600 of mechanical and towing costs is squared, the result is $2,560,000, which is what the company needs to set aside for a personal injury lawsuit. However, relating these numbers to an actual quantification of delayed maintenance is a difficult task.

NCHRP Research Report 859: Consequences of Delayed Maintenance of Highway Assets determines the consequences of the delayed maintenance of seven highway assets, including (1) pavements,

(2) bridges, (3) culverts, (4) guardrails, (5) lighting, (6) pavement markings, and (7) highway signs (Chang et al. 2017). The research team identified the maintenance activities, asset performance objectives, maintenance activity decision criteria, and current asset conditions, as well as performance models for forecasting asset conditions and needs analysis to determine the consequences of delayed maintenance. Based on the asset conditions, various scenarios were created to calculate the consequences of delayed maintenance. For pavement, four delayed maintenance scenarios were created: the first is an “all needs” scenario, determined by preserving the current condition; the second is to do nothing; the third is delayed maintenance by 2 years; and the final is budget-driven with limited funds. Specific consequences considered in the research include increased agency costs, changes in the backlog of agency investment needs, changes in asset condition, increased user costs resulting from more frequent asset failures, and/or deferral of investments.

Another study conducted by Hatry and Liner (1994) developed a methodology to quantify the consequences of deferred maintenance on highway assets. The study investigated the impact of deferred maintenance of pavement treatments on agency cost, pavement performance, and cost-effectiveness. The consequence of deferred maintenance of pavement varied based on asset class and intervention types. The increase in life-cycle cost and performance loss of delayed pavement maintenance was more severe for non-interstate highway compared to interstate highways, as well as for maintenance compared to rehabilitation. Similarly, another study found that considerable cost savings could be achieved if the pavement is maintained while in good condition (Schmuck and Maerschalk 1987). The maintenance cost increases tremendously if pavements are allowed to deteriorate into poor conditions.

In summary, the literature review found that the consequences of delayed maintenance on airport assets had not been investigated by any agencies. Therefore, the main objective of this report is to fill this research gap by developing a systematic process for the quantification of delayed maintenance on various types of airport assets.

2.4 Summary of Relevant Research Publications and Key Findings

Table 2-1 shows a summary of the publications pertinent to the various topics covered in the previous sections. The research applicable to budget prioritization was limited to highway infrastructure only. Several studies related to airport asset management were found during the literature search. However, literature specifically related to quantifying the impact of deferred maintenance on airport, building, transit, water, and wastewater assets was not found during the literature

Table 2-1. Summary of relevant publications.

review. Some studies found that deferred asset maintenance has negative consequences on asset life-cycle costs. Three studies quantified the impact of delayed maintenance on highway assets. However, none of the studies have quantified the impact of delayed maintenance on airport assets. Therefore, the research on this topic for airport assets seems relevant.

Based on the literature review, the impact of delayed maintenance on highway assets is shown in Figure 2-1. NCHRP Research Report 859: Consequences of Delayed Maintenance of Highway Assets is a key reference because the study is comprehensive for highway assets. However, this project’s focus is on airport assets that were not addressed in that report.

The key findings of the literature review are as follows:

• The major funding sources of airports are the AIP program, PFCs, tax-exempt bonds, state and local grants, and other revenue, e.g., tenant leases.
• Small-hub airports are more dependent on the AIP program, and large-hub airports’ main sources of revenue are PFCs.
• For capital budgeting, airports mostly depend upon their long-term capital CIP.
• The operating budget, which includes maintenance, is set by the commission’s rule and should be enough for at least 6 months.
• The pavement and bridge management system helps prioritize the maintenance budgets for pavement and bridges, respectively.
• The airport asset management studies focused more on prioritizing assets for maintenance purposes and using life-cycle costs while purchasing the assets instead of initial costs.
• The impact analysis found that deferred maintenance on highway assets increases costs associated with agency, life cycle, reactive maintenance, backlog, users, and accident costs, and decreases an asset’s performance.
• The impact of delayed maintenance has been investigated primarily for highway assets.