WASHINGTON -- House and Senate conferees reached an agreement last week on the airporl grants reauthorization bill and dropped a provision that some said could jeopardize airport bond ratings.

The controversial provision would have required that any disputed airport fees be placed m an escrow account for 120 days or until the dispute was resolved, whichever came sooner.

The compromise drops the escrow requirement and stipulates that the airlines continue paying a disputed fee until Transportation Secretary Federico Pena rules on whether it is reasonable. The airport. would be required to obtain some guarantee that it could repay the airline the fees in question should they be found unreasonable.

The bill "most certainly covers our concerns," said Ernie Perez, director of the airport bond rating division at Standard & Poor's Corp. "It is very positive to see the escrow provision is out and outstanding debt commitments have been grandfathered in."

To avoid disputes, airports and airlines will have to communicate more than they have in the past about terminal improvements and the possibilities of future fee increases, Perez said.

Airport rate flexibility has been "diminished somewhat" by this legislation, but without the escrow provision Standard & Poor's will still have a basis on which to rate the bonds, he said.

The primary positive change for airports in the fee dispute language is the time requirement for dispute resolution, said Robert R. Wigington, senior vice president for government and legal affairs at the Airport Council International.

In the past, fee disputes between airports and airlines have stretched out for years, but with the new bill the Department of Transportation has a limited time in which it must act, Wigington said.

"Over all, we are pleased" with how the legislation came out of conference, he said.

"It keeps the current standards on reasonableness of fees and makes improvements" in other areas, Wtgington said.

One of the improvements he commended was in the area of the illegal diversion of airport funds to other city projects. Under the bill, if an airport is found to be diverting its fund to other uses, the secretary must give that airport a "reasonable period of time to cure the violation" before leveling penalties, Wigington said.

At an Airport Council Internationalsponsored conference last month, several industry representatives expressed concern over the transportation secretary's involvement in fee disputes. But Penn spoke at the conference and said the Transportation Department would be no more involved in fee disputes than it is today.

"The clear intention in the legislation is that [the Department of Transportation] wouldn't have to get involved," Wigington said. Fee disputes would still be resolved at the local level, he said.

The bill also reauthorizes the airport improvement program and allocates $6.5 billion in grants over three years. The grant money was originally held up last year when the Senate could not reach a consensus over fee dispute resolution.

In the spring, a stopgap $800 million grant program was authorized through June 30. Passage of the three-year authorization will give airport grants continuity through fiscal 1996.

Congressional staffers were still working out the details of the legislation, but expected to introduce the bill into both the House and Senate by late Friday. A final vote is expected in the House this week, staff members said.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.