City of Santa Monica on Track for Confrontation with Federal Aviation Administration

Predictably, the Federal Aviation Administration (“FAA”) has weighed in strongly in opposition to the City of Santa Monica’s (“City”) plan to close the Santa Monica Airport (“Airport”) within the next two years.  The City, owner and operator of the Airport, plans to begin the process of closure, including cancellation and/or modification of leases held by various aeronautical service providers, such as providers of fuel, maintenance and hangar storage.  Those Airport incumbents are already paying rent on a month-to-month basis, subject to summary eviction. 

 

The apparent basis of Santa Monica’s position is that: (1) its obligation to maintain the airport is based solely on the terms of its contract with FAA for the provision of funding; and (2) according to its terms, that contract expires 20 years after the FAA’s last grant of funding.
 
The FAA’s position, obviously, differs dramatically.  The agency claims that, according to the terms of a $240,000 federal grant to the City in 2003, the City is obligated to keep the Airport open until at least 2023, see, e.g., FAA Order 5190.6B, Chapter 4, §§ 4.6.h(1) and (2).  Moreover, the FAA asserts that, under the terms of the transfer agreement governing the transfer of the airport property from the military back to the City after World War II, the City is obligated to keep the Airport open in perpetuity.
 

FAA’s position is not unanticipated, as we pointed out in our blog of February 20, 2014.  In the first instance, it is common knowledge among airport operators that the United States Congress has attached to the acceptance of federal funds responsibilities to consumers of the improvements made with those funds.  See, e.g., 49 U.S.C. § 47107(a)(1)-(6), implemented by Grant Assurance 22 which requires, in turn, that the operator of a federally obligated airport “make [its] airport available as an airport for public use on reasonable terms and without unjust discrimination to all types, kinds and classes of aeronautical activities, including commercial aeronautical activities offering services to the public at the airport.” See R-T 182, LLC v. Federal Aviation Administration, 519 F.3d 307, 309 (6th Cir. 2008).   

Moreover, while federal fund obligations normally last for the useful life of the facilities, or 20 years, after the grant of the funding, there are notable exceptions.  In addition to the exception that requires that real property purchased with federal funds be used for airport purposes in perpetuity, FAA Order 5190.6B, Chapter 4, §§ 4.6.h(2), there is also the parallel requirement that property transferred from the military pursuant to a surplus property agreement also be used for airport purposes indefinitely.  Both of these conditions apply in the case of the Airport, and both moot the “20 year” escape route relied upon by the City.  
 
Finally, the City plans to oppose, through legal action, FAA’s determination to stop the closure.  The City may be disappointed, however, when it arrives as it plans to do, in Federal District Court.  This is because the United States Congress, in the Federal Aviation Act, 49 U.S.C. § 40101, et seq., requires that any challenge to an FAA order be brought in a Federal Circuit Court of Appeals, either the Circuit in which the project is located, in this case the Ninth Circuit, or in the D.C. Circuit Court of Appeals.  See 49 U.S.C. § 46110(a).  Doubtlessly, City will argue that FAA’s effort to stop the closure is not the sort of agency action that falls within the strictures of that section of the statute.  That contest is inevitable, but the outcome for Santa Monica Airport is far from certain.  Stay tuned. 

Operators Seeking to Close Airports Navigate Difficult Regulatory Shoals

The permanent closure or “deactivation” of an underutilized public use airport has gained increasing traction among revenue starved airport sponsors, as well as disparate responses from affected parties.  Operators seek to save the drain on diminishing budgets; residential communities surrounding the airport hope for relief from the airport’s impacts; and the pilot community sees its access to the dwindling number of general aviation facilities shrinking further.  Whatever the rationale, the operator seeking to close and reuse an airport for non-aviation purposes, that has at any time accepted funds from the Federal Aviation Administration (“FAA”), faces substantial regulatory hurdles and complex procedural requirements.

First, closure of an airport requires a “release” from Federal grant obligations.  A “release” “is defined as the formal written authorization discharging and relinquishing the FAA’s right to enforce an airport’s contractual obligations,” FAA Order 5190.6B, § 22.2 (all references will be to FAA Order 5190.6B).  These may either be a release from a particular grant assurance or Federal contractual obligation, or may affirmatively permit disposal of some or all of the airport’s property, § 22.2.  The airport sponsor’s obligation to the FAA for personal property ends with the physical useful life of the property.  However, airport land acquired with Federal funds is federally obligated in perpetuity, § 22.3.

In considering whether to grant a release, the FAA will generally determine whether the release, including that of an entire airport, will have the “potential to protect, advance or benefit the public interest in aviation,” § 22.4.a.  More specifically, it will determine: “(1) the reasonableness and practicality of the sponsor’s request; (2) the effect of the request on needed aeronautical facilities; (3) the net benefit to civil aviation; (4) the compatibility of the proposals with needs of civil aviation,” § 22.4.a(1)-(4). 

The standards imposed also differ markedly for the disposal of personal and real property.  While the FAA may grant a release that permits the sponsor to abandon, demolish, or convert the personal property before its useful life expires, it will do so only when one of the following applies: (1) the facility is no longer needed for the purpose for which it was developed; (2) normal maintenance will no longer sustain the facility’s serviceability; or (3) the facility requires major reconstruction, rehabilitation, or repair, § 22.15.b.  The FAA may require the sponsor, as a condition of the release, to reimburse the Federal government or reinvest in an improved Airport Improvement Program (“AIP”) eligible project, § 22.15.d. 

The standards for releasing real property are far more restrictive.  FAA consent “shall be granted only if it is determined that the property is not needed for present or foreseeable public airport purposes,” § 22.16.  Most notably, the airport account must receive fair market value compensation for all deletions of airport real property from the airport even if the sponsor does not sell the property or sells the property below fair market value, § 22.16.  In addition, a total release permitting sale or disposal of federally obligated land must specify that the sponsor is obligated to include in any conveyance of a property interest a reservation assuring the continued right of flight and the ability to cause aircraft noise at unlimited levels over the land released, § 22.16.a.  Moreover, the conveyance must also “(1) prohibit the erection of structures or growth of natural objects that would constitute an obstruction to air navigation; [and] (2) prohibit any activity on the land that would interfere with or be a hazard to the flight of aircraft over the land or to and from the airport, or that interferes with air navigation and communications facilities serving the airport,” § 22.16. 

Finally, the requirements of release for the sale or disposal of real property differ according to the date of the Federal grant.  If no grant was received after December 30, 1987, “a sponsor’s request [for release] must assure that the Federal government shall be reimbursed or the Federal share of the net proceeds will be reinvested (a) in the airport, (b) in a replacement airport, or (c) in another operating airport,” § 22.19.a(1).  Where a grant was received after December 30, 1987 for land other than for noise compatibility purposes, an airport sponsor must dispose of the land at fair market value and deposit the Federal share of the sales proceeds into the Trust Fund, § 22.19.b(1).  In other words, for an airport that has received a grant after December 30, 1987, the flexibility on the disposition of any sales proceeds is eliminated. 

Whether an airport can be closed and/or transferred for non-aviation purposes depends almost entirely on the discretion of the FAA Associate Administrator for Airports whose discretion may not be delegated, § 22.20.  It is, therefore, critically important to follow all the procedural steps in obtaining a release, as well as the substantive requirements discussed here.  It should also be noted that where an airport was acquired as Federal surplus property from the military, different and even more restrictive regulation of transfer may exist.