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. 

FAA Again Changes its Position on "Through-the-Fence" Agreements with Owners of Residential Property

Spurred on by Congress, FAA has issued a proposed policy revising its current position “concerning through-the-fence access to a federally obligated airport from an adjacent or nearby property, when that property is used as a residence.”  77 Fed.Reg. 44515, Monday, July 30, 2012.  FAA’s current position, set forth in its previously published interim policy of March 18, 2011, 76 Fed.Reg. 15028, prohibited new residential “through-the-fence” access to Federally obligated airports. 

The change came in response to Congress’ passage of the FAA Modernization and Reform Act of 2012 (“FMRA”) on February 14, 2012.  Section 136 of FMRA permits general aviation (“GA”) airports, defined by the statute as “a public airport . . . that does not have commercial service or has scheduled service with less than 2,500 passenger boardings each year,” to extend or enter into residential through-the-fence agreements with property owners, or associations representing property owners, under specified conditions.  77 Fed.Reg. 44516.  Sponsors of commercial service airports, however, are treated quite differently. 

GA airports must meet the following conditions established by Congress in § 136:

(1) The property owner must pay access charges that the sponsor determines to be comparable to those fees charged to tenants and operators on-airport making similar use of the airport;

(2) The property owner must bear the cost of building and maintaining the infrastructure that the sponsor determines is necessary to provide access to the airfield from property located adjacent to or near the airport;

(3) The property owner must maintain the property for residential, noncommercial use for the duration of the agreement;

(4) The property owner must prohibit access to the airport from other properties through the property of the property owner; and

(5) The property owner must not provide aircraft refueling on the property. 

GA airports with existing through-the-fence agreements will be given until September 30, 2013 to establish that their agreements meet the standards set forth in § 136, 77 Fed.Reg. 44517, and will be evaluated on a case by case basis.  GA airports proposing new agreements will be asked to establish compliance prior to executing an agreement.  Id.  This difference arises from FAA’s acknowledgement of the legal enforceability of some forms of “through-the-fence” agreements (e.g., easements in some forms) under state land use law. 

The proposed policy is less conclusive, and less tolerant, with respect to commercial service airports.  It applies to commercial service airports with existing “through-the-fence” agreements, but continues to prohibit commercial service airports that do not have such agreements from entering into them.  See also, Revised Sponsor Grant Assurances, Assurance 5g, 77 Fed.Reg. 22576, April 13, 2012, which clarifies that sponsors of commercial service airports are not permitted to enter into residential through-the-fence arrangements. 

In addition to the standards set forth in FMRA § 136, commercial service airports with existing agreements must meet the following standards proposed by FAA:

(1) The sponsor must have sufficient control of access points and operations across airport boundaries to maintain safe operations, and to make changes in airport land use to meet future needs;

(2) By rule, or by agreement with the sponsor, through-the-fence users are obligated to comply with the airport’s rules and standards;

(3) The sponsor can and does collect fees from through-the-fence users comparable to those charged to airport tenants;

(4) Sponsors must be assured that operations at the airport will not be affected by hangars and residences on the airport boundary, at present or in the future;

(5) The potential for noncompatible land use adjacent to the airport boundary must be minimized consistent with Grant Assurance 21, Compatible Land Use. 

Finally, the extension of existing “through-the-fence” agreements is held to an even higher standard.  Sponsors must ensure not only that the agreement complies with § 136, and, at minimum, Grant Assurances 5 and 21, but also includes, but is not limited to, the following:

(1) The term of the access does not exceed 20 years;

(2) The residential development will not interfere with future airport expansion plans, as submitted in a current Airport Master Plan;

(3) The sponsor will impose and enforce safety and operating rules on through the fence residents utilizing the access while on the airport identical to those imposed on airport tenant and transient users;

(4) Through-the-fence residents will grant the sponsor a perpetual avigation easement for overflight, including unobstructed flight through the airspace necessary for takeoff and landing at the airport;

(5) Through-the-fence residents will waive any right to bring an action against the sponsor for existing and future operations and activities at the airport associated with aircraft noise and emissions;

(6) The sponsor will have a mechanism for ensuring that through-the-fence residents building houses or other structures will file FAA Form 7460-1, Notice of Proposed Construction or Alternation, to comply with FAA’s Part 77 obstruction requirements;

(7) The sponsor has a mechanism for ensuring through-the-fence residents do not create or permit conditions or engage in practices that could result in airport hazards, including wildlife attractants;

(8) Sponsors will impose future limits on the “through-the-fence” properties to aviation related uses such as “hangar homes,” through such mechanisms as zoning or mandatory deed restrictions, where legally tenable;

(9) The access agreement will be subordinate to the sponsor’s current and future grant assurances; and

(10) The sponsor has or will develop a process for educating “through-the-fence” residents about their rights and responsibilities.

Comments on the proposed policy will accepted until August 29, 2012.

** Update:  On Tuesday, August 28, 2012, a "Correction" was issued relating to an inadvertent omission in the Addresses paragraph in the Proposed Policy and the comment period has been extended to September 14, 2012 [77 Fed.Reg. 51948-51949]. 

 


 

FAA Reopens Comment Period on Massive Changes to the Part 16 Adjudication Process

On May 17, 2012, FAA published in the Federal Register a “Notice of Proposed Rulemaking (NPRM); Reopening of Comment Period” for “Rules of Practice for Federally Assisted Airport Enforcement Proceedings (Retrospective Regulatory Review)” first published in March, 2012.  In plain language, FAA is making substantial changes to the procedures for bringing a challenge to airports’ compliance with FAA grant assurances under 14 C.F.R. Part 16.  “Grant assurances” are those commitments made by airport sponsors in return for receipt of federal funding of airport projects, as required by 49 U.S.C. § 47107.  Any changes in the procedures for enforcing grant assurances are of significant interest not only to the airports, which may benefit from a relaxation in the procedures for challenging their actions, but also to airport users, such as fixed-base operators (“FBO”), airlines, and other airport related businesses.  The proposed changes are broad in scope and purportedly made for the purpose of, among other things, becoming consistent with the Federal Rules of Civil Procedure. 

The changes include, but are not limited to: (1) changes to 14 C.F.R. Part 16.26 to allow motions for summary judgment or dismissal to be filed by the airport before the date for its formal answer to the Part 16 complaint in order to eliminate duplication of effort in answering the complaint and challenging its legal adequacy at the same time; (2) termination of complainant’s standing to appeal pursuant to 14 C.F.R. Part 16.109, where FAA has already found the airport noncompliant thus achieving the complainant’s initial objective; (3) clarification of the requirement in Part 16.207 for a written motion to intervene by a party in any proceeding, and broadening of the current standard for intervention, which now requires a property or financial interest “that may not be adequately addressed by the parties,” with a less restrictive standard, i.e., “if the person has an interest that will benefit the proceedings;” (4) addition of new sections 16.33(e) and (f) and 16.245(e) and (f) to limit the grounds for appeal to issues that were before the court in the underlying action; and (5) addition of a new requirement in proposed section 215(e) that would allow deposition of FAA employees only “with the specific written permission of the Chief Counsel.” 

Of the major proposed changes, the last appears most questionable from a due process perspective.  As parties are entitled to obtain a broad range of information from FAA, including technical information, through the Freedom of Information Act, there does not appear to be any reason for the change, other than FAA’s alleged concern that, by deposing agency officials, parties are obtaining technical information they might otherwise have to obtain through expert witnesses.  As FAA officials are often the closest observers and most knowledgeable parties about the controlling regulation and grant assurances, as well as observance of them or lack thereof at a particular airport, it seems contrary to normal judicial procedure, as well as government’s obligations under the Constitution to provide a fair hearing, to require approval of FAA employees’ testimony by the FAA, the adjudicating agency. 

The comment period which officially ended May 4, 2012, is now extended to June 7, 2012.
 

Considering Closing an Airport? Be Careful! The FAA Has Set Many Pitfalls to Trap You.

 

Your local airport is becoming a drain on the local economy. Sure, it provides a few jobs, adds a certain cachet to the area and provides a hobby for the few people who can afford to purchase and maintain aircraft. But the annual expense of keeping the airport running – and running safely - is becoming more and more like a lead weight on your budget. “Let’s just close the thing,” you say. But wait, remember all that money you accepted from the FAA as part of the AIP grant program to lengthen the runway, pay for new taxiways, and purchase property? The FAA remembers. And before you can close the airport, there are many hurdles to clear set by the FAA to discourage the closure of airports.

1.            Take A Look At The Grant Assurances

First, take a look at the documents in your possession – the grant agreements you received from the FAA and signed as a condition of receiving the grants. As you are no doubt aware, under various Federal grant programs, you have agreed to assume certain statutorily defined obligations pertaining to the operation, use and maintenance of the Airport [49 U.S.C. § 47107(a)], that are described and implemented in FAA Order 5190.6B and memorialized in the application for Federal assistance as Grant Assurances, which become a part of the grant offer and bind the grant recipient contractually upon acceptance. 49 U.S.C. § 47107(a); FAA Order 5190.6B, “Guide To Sponsor Obligations” pp. 2-13 to 2-18.

 

 

The Grant Assurances primarily relevant to a proposed Airport closing or “deactivation” and reuse for non-aviation purposes are as follows. First, you, the airport sponsor, may not “sell, lease, encumber, or otherwise transfer or dispose of any part of its title or other interests in the property ... for the duration of the terms, conditions, and assurances in the grant agreement without approval by the Secretary [of Transportation].” See, e.g., Grant Assurance C.5.b. FAA regulations expand on this requirement. All of the land shown on Exhibit A to each grant constitutes the airport property obligated for compliance under the terms and covenants of the grant agreements. FAA Order 5190.6B. The airport sponsor is obligated to obtain FAA consent to delete any land so described and shown. Id. FAA consent shall be granted only if it is determined that the property is not needed for present or foreseeable public airport purposes. Id. Accordingly, if the airport sponsor’s Airport deactivation planning includes the sale, lease, encumbrance, or other transfer or disposition of its interests in the Federally obligated property, it: (1) must first obtain approval from the Secretary; by (2) establishing that the land to be alienated is no longer “needed” for public airport purposes.

Second, the airport sponsor is obligated to “suitably operate and maintain the airport and facilities. . . Any proposal to temporarily close the airport for nonaeronautical purposes must first be approved by the Secretary . . . [the Sponsor] will not cause or permit any activity or action thereon which would interfere with its use for airport purposes.” See, e.g., Grant Assurance C.19.a. This obligation to maintain the Airport includes the responsibility to operate the aeronautical facilities and common use areas for the benefit of the public. FAA Order 5190.6B, p. 2-15. Therefore, the airport sponsor “is more than a passive landlord of specialized real estate,” and has a continuing obligation to operate and maintain the Airport facilities. Id. For this reason, the airport sponsor may not cease to operate the airport prior to obtaining a release of its Grant Assurances from the FAA.

Third, “[f]or land purchased under a grant for airport development purposes (other than noise compatibility), [the airport sponsor] will, when the land is no longer needed for airport purposes, dispose of such land at fair market value or make available to the Secretary [of Transportation] an amount equal to the United States’ proportionate share of the fair market value of the land.” See, e.g., Grant Assurance 31.b.1. The United States’ share will either be reinvested in the national airport system or be deposited in the Aviation Trust Fund. Accordingly, the airport sponsor must either dispose of the land obtained with Federal grant funds at fair market value, paying a proportionate share to the Secretary, or make that proportionate share available to the United States without disposing of the property. Therefore, whether the airport sponsor chooses to dispose of the property purchased with Federal funds, maintain it for a public purpose other than aviation, or use it for non-public purposes, the airport sponsor must repay a proportionate share of the current fair market value of the land to the Federal government. There is no longer any limit on the duration of the terms, conditions, and assurances regarding real property acquired with Federal funds. [See, Grant Assurance B.1; FAA Order 5190.6B, p. 2-14] 

Federal regulations distinguish between the treatment of grants for the purchase of real property and those for airport development or improvement purposes. With respect to facilities developed or equipment obtained with Federal funds, the Assurances remain in effect for the useful life of the facilities developed or equipment acquired [See Grant Assurance B.1; FAA Order 5190.6B, p. 2-13], although this period may not exceed twenty (20) years from the date the grant offer was accepted. Id. 

In summary, deactivation of the Airport would require approval by the Secretary of Transportation and payment of the FAA’s proportionate share of the FMV of all real property acquired with Federal funds, as well as coordination with the FAA with respect to the disposition of grants made for airport development or improvement.

2.            Federal Regulations Allow the Release of the Airport Sponsor’s Obligations under the Grant Assurances.

Despite the seemingly unequivocal requirements of the Grant Assurances, the FAA has established procedures that allow the release, modification, reformation or amendment of airport agreements, including grant agreements, under certain prescribed circumstances. Specifically, “[w]ithin the specific authority conferred upon the Administrator by law, the FAA will, when requested, act to release, modify, reform, or amend any airport agreement to the extent that such action will protect, advance, or benefit the public interest in civil aviation.” FAA Order 5190.6B Section 22.31 (emphasis added). The FAA may grant relief from specific limitations or covenants of an agreement, or grant a complete and total release which authorizes the subsequent disposal of obligated airport property. Id. The FAA’s release may apply to specific facilities and parcels of land acquired with Federal assistance, which ultimately results in a partial airport closure, or disposal of an entire airport.

                a.            Deactivation, or Permanent Closure of the EntireAirport.

An airport sponsor may request the release of obligations for an entire airport. FAA Order 5190.6B, Section 22.20. ARP-1's concurrence is required before granting any release that would enable the disposal of an entire airport for non-aviation purposes. Moreover, each request to release an entire airport is considered by ARP-1 on a “case-by-case” basis without limitation to the guidance in FAA Order 5190.6B. In other words, the terms under which deactivation is allowed are expressly left to the complete discretion of ARP-1.

                                1.            Constraints on ARP-1' s Discretion.

Clearly, however, ARP-1's discretion is not unlimited. It will be guided, at least to some extent, not merely by the Grant Assurances, as set forth above, but also by applicable parallel Federal regulations and procedures. For example, where a release is sought to permit sale and disposal of land purchased with grant funds, apparently including deactivation, it must be demonstrated at minimum that (1) the land is no longer “needed” for airport purposes; and (2) the airport will repay that portion of the property’s FMV proportionate to the Federal Government’s share of the cost of the acquisition of such land, which sum is to be deposited in the Aviation Trust Fund. FAA Order 5190.6B, Section 22-19.

                                2.            Procedural Requirements.

Generally, the request for release must: (1) be in writing and signed by a duly authorized official of the airport owner [FAA Order 5190.6B, Section 22.23]; and (2) be specific, including the facts and circumstances justifying the request [FAA Order 5190.6B, Section 22.24]. The FAA will take into consideration factors such as: (1) the past and present owner’s compliance record under all its airport agreements and its actions to make available a safe and usable airport for maximum aeronautical use by the public; (2) evidence that the owner has taken or agreed to take all actions possible to correct noncompliance situations at the airport, if applicable; (3) the reasonableness and practicality of the owner’s request in terms of aeronautical facilities which are needed and the priority of need; (4) the net benefit to be derived by civil aviation and the compatibility of the proposal with the needs of civil aviation; and (5) consistency with the guidelines for specific types of releases. FAA Order 5190.6B, Section 22.27.

                                3.            Applicable Policy Determinations.

Moreover, the FAA must also make at least one of several policy determination, those potentially applicable here include that: (1) the public purpose which a term, condition, or covenant of an agreement, or the agreement itself, was intended to serve is no longer applicable; or (2) the release, modification, reformation, or amendment of an applicable agreement will not prevent accomplishment of the public purposes for which the airport or its facilities were obligated, and such action is necessary to protect or advance the interest of the United States in civil aviation; or (3) the release, modification, reformation or amendment will conform the rights and obligations of the owner to the statutes of the United States and the intent of Congress consistent with applicable law. FAA Order 5190.6B, Section 22.28.

                b.            Treatment of Airport Improvements Other than Land.

Finally, where a release is sought to abandon, demolish or convert grant-funded improvements, other than land, the FAA must find that: (1) the grant agreement involved has expired; or (2) the facility in question is no longer needed for the purpose for which it was developed; or (3) the useful life of the facility in question has expired

Despite the inherently discretionary nature of FAA regulations governing deactivation, it seems clear that, for real property they require, at a minimum: (1) repayment of a sum (some proportion of the current FMV of the real property purchased with FAA funds) which is substantially in excess of the original amount of the FAA Grants, but which can theoretically be obtained through resale or development of the Airport property; and (2) successful argument that the deactivation will benefit the National Air Transportation System, which can be based upon the substantial benefit to be derived from the airport sponsor’s deposit in the Aviation Trust Fund of the sum required to compensate the FAA for deactivation, which can then be used for the development and improvement of other airports in the system.

3.            Conclusion

The deactivation of an airport is not impossible, but it is tricky and complex due to the fact that most airports have accepted federal funds to keep the airport operating safely. This post should not be used as an exhaustive “how-to” on closing an airport, and it would behoove airport sponsors contemplating closure to consult with an attorney who is cognizant of the complex and often confusing regulations surrounding airports and grant assurances.

 

FAA Proposes to Have Airports Include a List of Based Aircraft On All AIP Grant Applications

On September 8, 2008, the FAA published a notice in the Federal Register (73 Fed.Reg. 52074) that it is proposing to modify the standard grant application requirements that are required of a sponsor of a non-primary airport before receiving a grant under the Airport Improvement Program (AIP).  This modification would require that a sponsor of a nonprimary airport submit a list of the aircraft (both fixed wing and rotary wing) that are based on the airport.  The FAA invites public comments on this proposed modification.  Comments must be submitted on or before October 8, 2008.

FAA believes that this information is necessary because "accurate information on based aircraft is an important element of justification for many proposed AIP projects at nonprimary airports."  In addition, the FAA posits that the information regarding based aircraft "supports the airport's importance in the biennial Report to Congress - The National Plan of Integrated Airport Systems (NPIAS) and in the Airport Master Record." 

FAA defines "based aircraft" as an "operational aircraft that is registered in the FAA Aircraft Registry that is at the airport the majority of the year."  The proposal is that the FAA may require a sponsor for a nonprimary airport to include the "N-number" for each based aircraft or to update the list of based aircraft submitted with the most recent Form 5010 inspection.  Unfortunately, the Notice does not provide definition of how airports are to determine which aircraft are "based aircraft."  The FAA concludes the Notice by stating that it will consider a failure to provide the information "as a factor when considering a request from the airport for discretionary funding."

Comments can be sent or delivered to FAA, Airports Financial Assistance Division, APP-500, Room 619, 800 Independence Avenue, SW., Washington D.C. 20591.  Comments can also be submitted electronically by clicking here and then clicking on "Send a Comment or Submission."  This will take you to the Regulations.gov page for docket number FAA-2008-0972-0001.