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APPENDIX ll: PRELIMINARY AIRPORT ASSESSMENT <br />AIRPORT OVERVIEW <br />direct ownership model is a valid option for consideration. However, direct ownership <br />increases the airport sponsor's risk. Focusing on the development of land for <br />commercial real estate provides a good illustration of the factors that must be taken <br />with the direct ownership option. Direct ownership involves the airport sponsor <br />assuming the role of developer and, therefore, the obligations and risks inherent in <br />that role. The airport sponsor owns the entire project and receives all the profits. <br />Should the project fail to meet projections, the airport sponsor assumes the losses of <br />the failed project, as opposed to being a traditional lessor. Given that most airports <br />are not tax paying enterprises, such losses do not provide a tax incentive to them, as <br />they might to a tax paying private party. The second significant risk is the financing. <br />Should the project fail to generate sufficient cash flow to amortize debt, the airport <br />sponsor is responsible for all shortfalls. The reward for assumption of all these risks is <br />the receipt of 100% of the profits of successful developments. Accordingly, solid <br />financial forecasts are crucial to any analysis of the viability of a project to determine <br />whether such profits are likely to be sufficient to make the risk worthwhile. <br />NON.AERONAUTICAL REVENUE FUNDING SOURCES <br />certain restrictions related to non-aeronautical use, the FAA recognizes that in order for <br />certain airports to fulfill their obligation of making the airport as self-sustaining as <br />possible under the circumstances existing that it is sometimes necessary for the FAA <br />to release the airport sponsor of these restrictions when certain lands and <br />improvements are not needed in the near term for aeronautical use. <br />Therefore, another excellent revenue funding source for airports can be the (1) leasing <br />of airport land for the development of lessee owned improvements for non-aeronautical <br />use and (2) leasing of land and improvements and facilities owned by the airport <br />sponsor for non-aeronautical use by lessees. lt is important to remember that, <br />generally, the FAA must approve any non-aeronautical use of airport land and <br />improvements designated for aeronautical use purposes. ln Figure 3, some examples <br />of non-aeronautical land and improvement uses are identified <br />Airport Strategic Business Plan, 0712612021 25