[Federal Register Volume 61, Number 38 (Monday, February 26, 1996)]
[Notices]
[Pages 7134-7144]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-4270]
-----------------------------------------------------------------------
DEPARTMENT OF TRANSPORTATION
[Docket No. 28472]
Policy and Procedures Concerning the Use of Airport Revenue
AGENCY: Federal Aviation Administration (FAA), Transportation.
ACTION: Notice of proposed policy; request for comments.
-----------------------------------------------------------------------
SUMMARY: This document proposes a statement of policy and procedures
concerning the use of airport revenue. This document discusses in
detail the requirement that revenue at public airports that have
received Federal grants generally be used only for airport purposes.
The document proposes definitions of ``airport revenue'' and ``revenue
diversion,'' and discusses the permitted and prohibited uses of airport
revenue, and the procedures for monitoring compliance with the revenue
use requirement. A statement of policy is required by the Federal
Aviation Administration Authorization Act of 1994. The FAA is issuing a
proposed policy and requesting public comment because of substantial
public and industry interest in the subject matter. While the policy
statement proposed is not made effective at this time, statutory
requirements relating to the use of airport revenue remain in effect
and will be enforced by the FAA. Airport sponsors may assume that the
FAA would act consistently with the views expressed in this document in
any enforcement action for revenue diversion taken before a final
policy statement is issued.
DATES: Comments must be received by April 26, 1996.
ADDRESSES: Comments should be mailed, in quadruplicate, to: Federal
Aviation Administration, Office of Chief Counsel, Attention: Rules
Docket (AGC-200), Docket No. 28472, 800 Independence Avenue, SW.,
Washington, DC 20591. All comments must be marked: ``Docket No.
28472.'' Commenters wishing the FAA to acknowledge receipt of their
comments must include a pre-addressed, stamped postcard on which the
following statement is made: ``Comments to Docket No. 28472.'' The
postcard will be date stamped and mailed to the commenter.
Comments on this Notice may be examined in room 915G on weekdays,
except on Federal holidays, between 8:30 a.m. and 5 p.m.
FOR FURTHER INFORMATION CONTACT:
Benedict D. Castellano, Manager, Airport Safety and Compliance Branch,
AAS-310, Federal Aviation Administration, 800 Independence Ave. SW.,
Washington, DC 20591, telephone (202) 267-8728; or Jonathan W. Cross,
Airports Law Branch, AGC-610, Office of the Chief Counsel, Federal
Aviation Administration, 800 Independence Avenue, SW., Washington, DC
20591, telephone (202) 267-3473.
SUPPLEMENTARY INFORMATION: This proposed statement of policy and
related procedures is being published pursuant to section 112(a) of the
Federal Aviation Administration Authorization Act of 1994, Pub. L. No.
103-305 (August 23, 1994) (1994 Authorization Act). That section
requires the Secretary
[[Page 7135]]
to establish policies and procedures assuring the ``prompt and
effective enforcement'' of the requirement relating to the use of
airport revenue (also called the ``revenue retention requirement'') (49
U.S.C. 47107(b)) and the requirement that airports be as self-
sustaining as possible (49 U.S.C. 47107(a)(13)), and of the Airport
Improvement Program (AIP) sponsor assurances made under these sections.
Section 112 includes specific guidance and requirements for the
mandated policies and procedures.
For convenience, the term ``sponsor'' is used throughout this
document to mean the state or local government body obligated under an
airport grant agreement. For purposes of the proposed policy statement
the term is generally interchangeable with the term ``airport owner or
operator'' used in some statutes. A sponsor may be an entity that
exists only to operate the airport, such as an airport authority
established by state law. Other airports are owned by a state, county,
or city government and operated by an agency of that government, in
which case the state, county, or city is the sponsor, rather than the
subordinate agency.
The Airport and Airway Improvement Act of 1982
Under the Airport and Airway Improvement Act of 1982, as amended
(AAIA), part of title V of the Tax Equity and Fiscal Responsibility
Act, Public Law 97-248, repealed and reenacted without substantive
change, Public Law 103-272 (July 5, 1994), 49 U.S.C. 47101, et seq., as
amended by Public Law 103-305 (August 23, 1994), public agencies
receiving Federal grants for airport development since September 3,
1982, are required to comply with the revenue retention requirement,
section 511(a)(12) of the AAIA, now codified at 49 U.S.C. 47107(b).
As originally enacted in 1982, the revenue retention assurance
required airport owners to use ``* * * all revenues generated by the
airport * * * for the capital or operating costs of the airport, the
local airport system, or other local facilities which are owned or
operated by the owner or operator of the airport and directly related
to the actual transportation of passengers or property.'' The plain
purpose of section 511(a)(12) was to prevent an airport owner or
operator who receives Federal assistance from using airport revenues
for expenditures unrelated to the airport. Thus, according to the
requirement, a grant recipient could not use airport revenues to pay
for ``capital or operating costs'' that were not airport-related.
According to a recent House Report,
The rationale for [the revenue retention requirement] is that
the Federal AIP program can underwrite only about 20% to 30% of the
total capital development needed by airports. To ensure the maximum
effectiveness of the AIP program, airports should also spend all of
the money they generate to operate and develop the airport. A
federal grant should not furnish an opportunity for an airport to
use federal funds to replace other airport generated funds, and then
use the latter for general governmental purposes, resulting in no
net capital improvements for the federal grant dollars expended.
H.R. Rep. No. 103-240, 103d Cong., 1st Sess. 14 (1993).
The original revenue retention requirement also contained an
exception, or ``grandfather'' provision, permitting the use of airport
revenue for non-airport purposes in certain cases in which the use
predates the AAIA. Specifically, revenue use restrictions did not apply
where pre-September 3, 1982, covenants or assurances in debt
obligations previously issued by the airport owner or operator, or
provisions in governing statutes enacted before September 3, 1982, that
control the owner's or operator's financing, provided for the use of
revenues from any of the airport owner's or operator's facilities,
including the airport, to support not only the airport but also the
airport owner's or operator's general debt obligations or other
facilities.
The House and Senate Conference Reports on the AAIA describe the
revenue retention requirement in section 511(a)(12) as follows:
One [requirement] is that airports receiving assistance under
this program must dedicate all revenues generated by the airport for
the capital [and] operating costs of that airport, the local airport
system, or other local facilities which are owned by the owner or
operator of the airport and used for the transportation of
passengers or property. The provision is designed to ensure that
airport systems which are receiving Federal assistance are utilizing
all locally generated revenue for the systems which they operate.
Airports that are part of a unified ports authority are exempt from
this requirement if covenants or assurances in previously issued
debt obligations or controlling statutes require that these funds
are available for use at other port facilities.
However, airport users should not be burdened with ``hidden
taxation'' for unrelated municipal services.
This provision is not intended to apply to revenue generated by
facilities which are located on airport property but are unrelated to
air operations or services which support or facilitate air
transportation. It would accordingly not apply to revenue generated by
such facilities as a water reservoir or a convention center which
happen to be located on airport property, but which serve neither the
airport nor any air transportation purpose. It would apply to such
facilities as terminal concessions and parking lots serving the
terminal or other air transportation purposes.
H.R. Conf. Rep. No. 97-760, 97th Cong., 2d Sess. pt. 3,697,712
(1982); see also, S. Rep. No. 97-494, vol. 2, 97th Cong., 2d Sess.
28 (1982).
The Airport and Airway Safety and Capacity Expansion Act of 1987
The Airport and Airway Safety and Capacity Expansion Act of 1987,
Public Law 100-223 (December 30, 1987), amended the revenue retention
requirement by requiring that such local facilities be ``directly and
substantially related to actual air transportation of passengers or
property.'' This amendment narrowed the permissible uses of airport
revenues to expenditures that are not only ``directly'' but also
``substantially'' related to actual air transportation, to further
assure that such revenues are not diverted for general expenses. The
1987 Act also required local taxes on aviation fuel enacted after
December 30, 1987, to be spent on the airport, and slightly modified
the grandfathering language to clarify its application only to pre-
September 3, 1982, debt obligations or legislation controlling
financing. The 1987 Act's legislative history reaffirms the earlier
statement that Sec. 511(a)(12) is not intended to apply to revenue
generated by facilities located on airport property but unrelated to
air operations or services that support or facilitate air
transportation. H.R. Conf. Rep. No. 100-484, 100th Cong., 2d Sess. 63
(1987), reprinted in 1987 U.S.C.C.A.N. 2638; see also, H.R. Rep. No.
100-123 (II), 100th Cong., 2d Sess. 14, reprinted in 1987 U.S.C.C.A.N.
2601, 2613.
The Federal Aviation Administration Authorization Act of 1994
Several provisions of the Federal Aviation Administration
Authorization Act of 1994, Public Law 103-305 (August 23, 1994),
address revenue diversion. Section 110 adds a policy statement to Title
49, Chapter 471, ``Airport Development,'' concerning the requirement
that airports be as self-sustaining as possible. That section restates
the requirement and also states that in establishing new fees, rates,
and charges, and generating revenues from all sources, airport owners
and operators should not seek to create revenue surpluses that exceed
the amounts to be used for airport system
[[Page 7136]]
purposes and for other purposes for which airport revenues may be spent
under section 47107(b) of this title, including reasonable reserves and
other funds to facilitate financing and cover contingencies.
Section 111 adds a new sponsor assurance. Airport owners or
operators will now be required to submit to the Secretary and make
available to the public an annual report listing all amounts paid by
the airport to other units of government and the purposes for the
payments. Airport owners or operators must also make available a
listing of all services and property provided to other units of
government and the amount of compensation received for provision of
each such service and property. Section 111 also requires the Secretary
to issue a simplified format for reporting applicable to airports to
assist in public understanding of airport finances and to provide
information concerning the amount of any revenue surplus, the amount of
concession-generated revenue, and other information required by the
Secretary. The Secretary is also required to provide an annual summary
of the financial reports to various Congressional committees. See, H.R.
Conf. Rep. No. 103-677, 103d Cong., 2d Sess. 68 (1994).
Section 112(a) requires the Secretary to establish policies and
procedures that will assure the prompt and effective enforcement of the
statutory provisions in 49 U.S.C. 47107, subsections (a)(13) (the
requirement that airports be as self-sustaining as possible) and (b)
(the revenue retention requirement) and the sponsor assurances made
under such subsections. Section 112(a) also sets forth four prohibited
forms of revenue diversion, which are included in the proposed policy
statement.
Section 112(b) amends 49 U.S.C. 47111, ``Payments under project
grant agreements,'' and requires the Secretary to withhold approval of
any new grant application, or any proposed modification that would
increase funding, and withhold approval of any new application to
impose a Passenger Facility Charge (PFC), if after notice and
opportunity for hearing, the Secretary has found a violation of 49
U.S.C. 47107(b), as further defined by 49 U.S.C. 47107(l), or a
violation of the assurance made under 49 U.S.C. 47107(b), and the
sponsor has not taken corrective action to cure the violation. Section
112(b) also authorizes the Secretary to seek enforcement through writ
of injunction in United States district court for any violation of
Title 49, Chapter 471, or the sponsor assurances made under that
Chapter.
Section 112(c) authorizes the Secretary to impose civil penalties
up to a maximum of $50,000 on airport sponsors for violations of the
revenue retention requirement. Civil penalties may not be imposed on
any individual and the Secretary has the authority to compromise the
penalties. See, H.R. Conf. Rep. No. 103-677, 103d Cong., 2d Sess. 67-68
(1994).
Section 112(d) requires the Secretary, in administering the 1994
Authorization Act's revenue diversion provisions and the AIP
discretionary grants, to consider the amount being lawfully diverted
pursuant to the grandfathering provision by the sponsor compared to the
amount being sought in discretionary grants in reviewing the grant
application. Consequently, in addition to the prohibition against
awarding grants to airport sponsors that have illegally diverted
revenue, the Secretary must now consider the lawful-diversion of
airport revenues by airport sponsors under the grandfather provision as
a factor militating against the distribution of discretionary grants to
the airport, if the amounts being lawfully diverted exceed the amounts
so lawfully diverted in the first year after enactment of section 112,
adjusted for inflation.
Section 112(e), which amends the Anti-Head Tax Act, 49 U.S.C.
40116(d)(2)(A), prohibits a State, political subdivision, or an
authority acting for a State or political subdivision from collecting a
new tax, fee, or charge which is imposed exclusively upon any business
located at an airport or operating as a permittee of the airport, other
than a tax, fee, or charge utilized for airport or aeronautical
purposes.
Investigation by the House Committee on Appropriations
In December 1993, the Surveys and Investigations Staff of the
United States House of Representatives presented a report to the
Committee on Appropriations concerning the diversion of airport
revenues from commercial air service airports in the United States. The
staff stated in the report that out of 30 airports investigated,
airport revenue was being diverted at 17 airports. The staff
recognized, however, that most of the revenue was being diverted
lawfully under the grandfather provision. The report stated that of the
approximately $900 million that was diverted, $641.3 million was
lawfully diverted under the grandfather exception (according to the DOT
General Counsel's Office), and $140.8 million was diverted under the
grandfather exception where the sponsors themselves proclaimed the
exception. The report stated that $111.7 million of the $900 million
total was diverted at airports where the sponsors did not appear to
meet the statutory exception. The report stated that more FAA oversight
was needed to assure that sponsors comply with the conditions required
by Federal law on the use of airport revenue. The DOT Office of the
Inspector General (OIG) has conducted audits of 13 of the 30 airports
investigated by the committee staff.
Investigation by the Department of Transportation's Office of the
Inspector General
On March 7, 1994, the DOT OIG released a report concerning the
FAA's monitoring of the use of airport revenues at 22 airports
throughout the United States. That report concluded that FAA monitoring
was not adequate to ensure fee and rental structures were maintained
that made airports as self-sustaining as possible, or that airport
revenues were used only for the capital and operating costs of the
airports. Where the OIG report indicated actual cases of potential
revenue diversion, the FAA has investigated and taken action to restore
the sponsor to compliance. At airports where the OIG cited the failure
to charge fair market value for aeronautical facilities, the FAA finds
this latter practice consistent with the Policy Regarding Airport Rates
and Charges issued in February 1995, which limits a sponsor's total
charges to aeronautical users to the total cost of services provided,
and the proposed revision of the policy issued in September 1995. The
self-sustaining obligation does not require a sponsor to charge
aeronautical users more than its aeronautical costs. The OIG
recommended that the FAA increase its monitoring of airport sponsors.
It should be noted that more than 2,500 airports are subject to such
monitoring. The FAA expects to continue to work with the OIG on these
issues.
Airport Revenue
Background
In addressing the requirement that airport revenue be used for
certain purposes, it is first necessary to make clear which funds
received by an airport sponsor ``* * * all revenues generated by the
airport,'' within the meaning of 49 U.S.C. 47107(b). Airports generate
revenues for the sponsor, for air carriers, and for commercial tenants.
While the income received by air carriers and tenants for sales and
business activity on the airport is not ``airport revenue,'' within the
meaning of section 47107(b), most revenue received by the sponsor as
airport owner and operator is
[[Page 7137]]
considered airport revenue. the airport sponsor receives payments for
the use of the airport in the form of landing fees, land and facility
rental, and, in some cases, a share of the gross receipts or profit
(e.g., concession fees or royalties) from the commercial tenant. The
sponsor may receive revenue from the sale of real or personal airport
property. A sponsor may also receive income from an airport-related
facility that is not on the airport property map, commonly referred to
as ``Exhibit A,'' but that supports the operation of the airport, such
as a remote parking lot or downtown terminal funded from airport
revenues. Sometimes, the airport sponsor directly engages in a
commercial activity and thus receives all of the gross receipts of the
commercial activity rather than just the rental it would receive as
landlord.
FAA Internal Orders
The FAA routinely issues internal guidance to its employees in the
form of nonregulatory directives, including handbooks. Orders do not
seek to prescribe conduct for persons outside the agency, and they
incorporate provisions for deviation from the stated guidance by agency
personnel.
The Airport Improvement Program (AIP) Handbook, FAA Order 5100.38A
(October 24, 1989), and Airport Compliance Requirements, FAA Order
5190.6A (October 2, 1989), both contain provisions that address the use
of airport revenue. The agency believes in most cases that the
statements in these orders are consistent with the proposed policy;
however, to the extent that there is any apparent inconsistency, the
final policy statement will take precedence and the orders will be
revised to reflect the policies adopted. The final policy would also
supersede any other inconsistent statements of agency policy appearing
in correspondence or other form.
Definition of Airport Revenue
Under this proposed policy, the following types of fees, charges,
rents, or other payments received by or accruing to the sponsor
(revenue) are considered to be ``airport revenue:''
(1) Revenue from air carriers, tenants, transferees, and other
parties. Airport revenue includes all revenue received by the sponsor
for the activities of others or the transfer of rights to others
relating to the airport, including revenue received:
(a) for the right to conduct an activity on the airport or to use
or occupy airport property;
(b) for the sale, transfer, or disposition of real airport property
not acquired with Federal assistance or personal airport property not
acquired with Federal assistance, or any interest in that property,
including sale through a condemnation proceeding;
(c) for the sale of (or sale or lease of rights in) sponsor-owned
mineral, natural, or agricultural products or water to be taken from
the airport; or
(d) for the right to conduct an activity on, or for the use or
disposition of, real or personal property or any interest therein owned
or controlled by the sponsor and used for an airport-related purpose
but not located on the airport;
(2) Revenue from sponsor activities. Airport revenue generally
includes all revenue received by the sponsor for activities conducted
by the sponsor itself as airport owner and operator, including revenue
received:
(a) from any activity conducted by the sponsor on airport property
acquired with Federal assistance;
(b) from any aeronautical activity conducted by the sponsor; or
(c) from any nonaeronautical activity conducted by the sponsor on
airport property not acquired with Federal assistance, up to an amount
appropriately attributable to the use of the property (such as the
amount of rent that would be charged a commercial tenant).
In general, revenue received by the sponsor for an airport activity
is ``airport revenue.'' However, in consideration of legislative
history, a distinction is made where the sponsor itself undertakes an
activity on airport property not acquired with Federal assistance, if
the activity is not related to air operations or services that support
or facilitate air transportation. In that case, as represented in
subparagraph (2)(c) of the definition, only an amount properly
attributable for the use of airport property, such as the rent that a
commercial tenant would pay, would be considered airport revenue.
Subparagraph (2)(c) of the definition of ``airport revenue'' results
from legislative history that indicates the revenue retention
requirement is not intended to apply to all revenue generated by
facilities that are located on airport property but are ``* * *
unrelated to air operations or services which support or facilitate air
transportation.'' H.R. Conf. Rep. No. 97-760, 97th Cong., 2d Sess. pt.
3, 697,712 (1982). The language states that the requirement would
therefore not apply to revenue generated by facilities such as a ``* *
* water reservoir or a convention center which happen to be located on
airport property, but which serve neither the airport nor any air
transportation purpose.'' Id.
In a typical airport situation, a commercial enterprise earns gross
income on the airport and then makes a payment to the airport sponsor
for the use of the facility and the right to conduct business on the
airport. The gross income to the enterprise is not airport revenue, but
the payments to the sponsor are. We read the report language concerning
the conference center and reservoir to apply not to this typical
situation, which would result in free use of airport property, but
rather to the special case in which a local government is the airport
sponsor and is at the same time conducting a nonaeronautical enterprise
on the airport (such as a convention center). In this latter case the
sponsor is technically receiving all of the gross receipts of the
enterprise. Since the report language indicates that such gross
receipts should not be considered airport revenue, we read the
legislative history to mean that only the amount properly attributable
for the use of the airport property (such as the amount of facility or
land rental a commercial tenant would pay) would be considered to
constitute airport revenue. The remaining gross receipts would not be
airport revenue and could be used for non-airport purposes. This
interpretation is consistent with the report language, and ensures that
the airport receives an equivalent amount for the commercial use of
property whether the property is used by a private tenant or by the
sponsor itself. If the sponsor activity is related to air
transportation, then the entire amount of gross receipts would be
airport revenue, as represented in subparagraphs (2)(a) and (2)(b) of
the definition.
Airport revenue does not include Passenger Facility Charges
received by a sponsor as public agency in accordance with 49 U.S.C.
40117 and 14 C.F.R. part 158. Also, the disposition of land acquired by
Federal donation or with Federal assistance is governed by specific
requirements included in the agreement between the United States and
the sponsor relating to such land. Specific provisions applying in both
cases are more restrictive than the general restrictions on use of
airport revenue under section 47107(b).
Use of Proceeds From the Sale of Airport Land
Background
An airport sponsor that acquires real property for airport purposes
may do so through any of four methods. First, the airport sponsor may
receive a Federal grant which will typically pay a percentage of the
project costs. Second,
[[Page 7138]]
the property may be conveyed to the airport sponsor by the Federal
Government for no consideration through the Surplus Property Act or
through cost-free transfers pursuant to airport aid statutes. Third,
the airport sponsor may acquire property for the airport paid for by
the general governmental or municipality funds or donated privately.
Fourth, the airport sponsor may utilize airport revenues to acquire the
property or to reimburse its general funds for an acquisition.
Use of proceeds resulting from the sale of real property acquired
through the first and second methods described above is generally
straightforward. In those examples, the use of sales proceeds is likely
to be governed by special provisions contained in the agreement between
the United States and the sponsor. As a general rule, such proceeds
must be applied to the airport and be used for aeronautical purposes
or, in the case of grant-acquired land, returned to the Aviation Trust
Fund.
Use of sale proceeds resulting from the sale of real property
acquired with government or municipal funds, airport revenues, or by
private donation, requires greater discussion. The paramount issue is
whether the sales proceeds from airport real property fall within the
scope of the revenue retention requirement's language, ``* * * all
revenues generated by the airport,'' 49 U.S.C. 47107(b), where the
property was not donated by the United States or acquired with Federal
assistance. This language is not defined in the AAIA or subsequent
statutes. Thus, the Secretary has the authority to define airport
revenue in a manner consistent with the purposes of 511(a)(12) of the
AAIA and 49 U.S.C. 47107(b). As stated in the proposed policy, we
propose that the term ``* * * all revenues generated by the airport * *
*'' should include proceeds from the sale of all property donated by
the United States or acquired with Federal financial assistance.
The revenue retention requirement should be read in the overall
context of the statute and underlying Federal policy--i.e., that users
of the airport system should pay for the cost of that system, and that
airports should be self-sustaining (see, 49 U.S.C. 47107(a)(13)), and
that users should not be forced to pay ``hidden taxes'' to finance
other state and municipal programs. If sales proceeds from parcels of
realty are treated as airport revenue, the goal of self-sustainability
is furthered; more resources are available to fund the capital and
operating costs of the airport system; and airport users are not
indirectly providing financial support for other state and municipal
programs. Finally, this interpretation alleviates the potential need
for Federal discretionary grants to fund capital improvements that
could be funded from the proceeds from the sale.
This treatment is especially appropriate in the context of the
fourth method--property purchased with airport revenue, including the
case where airport revenues are used to reimburse the sponsor's general
(nonairport) fund--to assure that the sale does not lead to the use of
airport revenue indirectly for non-airport purposes.
For several reasons, the proposed policy draws no distinction
between property acquired with airport revenue (directly or indirectly)
and property acquired with sponsor general funds or by donation. First,
the inclusion of the proceeds from the sale of all airport property is
most consistent with the purposes of the revenue retention and self-
sustaining grant assurances. Second, in practice it may be difficult to
determine whether a particular parcel of property was acquired with
airport revenue, directly or indirectly. Finally, in the case of
property acquired for the airport with general funds, an airport
sponsor may in any event recoup its unreimbursed capital contributions
and operating expenses from airport revenues, and it may do so
regardless of when the expenses were incurred. This interpretation
results from a February 1991, opinion from the United States Department
of Justice (DOJ), Office of Legal Counsel, concerning a proposed long-
term lease of the Albany Airport, Albany County, New York. The DOJ
opinion is discussed further below. While an airport sponsor could not
recoup from airport revenues the value of privately donated land under
this policy, it could recoup its own capital contribution.
FAA Internal Orders
To avoid possible ambiguity regarding our policy concerning sales
proceeds, relevant portions of FAA Order 5190.6A, ``Airport Compliance
Requirements,'' (October 2, 1989), and FAA Order 5100.38A, ``Airport
Improvement Handbook'' (October 24, 1989), are discussed below. To the
extent that there is any inconsistency between the provisions of these
orders and this Policy, the Policy takes precedence and the orders will
be revised to reflect the policies adopted in this statement.
Paragraph 7-18 of the Compliance Handbook states that in the
context of land not acquired with Federal assistance (appearing on
Exhibit A), * * * there is no required disposition of net revenues from
sale or disposal. However, in view of the ADAP [Airport Development Aid
Program]/AIP requirement that airports become as financially self-
sustaining as possible, the FAA should encourage the owner to use any
net revenues for needed airport development and to consider an exchange
of released property for needed property.
As written, this statement did not fully reflect the FAA's
operational implementation of Sec. 511(a)(12) on a day-to-day basis,
and is facially inconsistent with the policy being proposed in this
document. As stated above, the Compliance Handbook will be modified to
conform to the final policy adopted.
In actual past practice, the FAA discouraged the use of sale
proceeds for non-airport purposes, even for property acquired through
private capital or sponsor donation. While paragraph 7-18 states,
``* * * there is no required disposition of net revenues from sale or
disposal * * *,'' that paragraph also provides that FAA should
encourage the sponsor to devote the proceeds to the airport. Thus, the
agency routinely encouraged sponsors to apply sales proceeds for the
capital and operating costs of the airport. Sale approvals were not
generally provided without such a promise by the sponsor.
In short, although the statement ``* * * there is no required
disposition of net revenues from sale or disposal * * *'' appears in
the Compliance Handbook, the agency did not traditionally allow
sponsors to exercise the implied discretion. Rather, the agency
actively promoted the policy of strongly encouraging the sponsor to
devote the proceeds to the airport, through its power to grant
releases.
Paragraph 630 of the AIP Handbook provides that, ``[a]irport
revenue does not include proceeds from the sale of real property owned
by the sponsor.'' This statement is correct in context because it
refers to real property acquired with AIP funds. In the case of such
land, specific statutory provisions governing proceeds of sale take
precedence over the general requirement of Sec. 511(a)(12). Those
statutory provisions are incorporated into AIP grant agreements. Again,
as a general rule, such proceeds must be applied to the airport and be
used for aeronautical purposes. Thus, while the statement indicates
that proceeds in this context are not airport revenue, it does not mean
that the use of those proceeds is not restricted.
[[Page 7139]]
How the Proposed Policy Addresses Use of Sale Proceeds
Proceeds from the sale of airport real property are considered
airport revenue, and are addressed in the ``Definitions'' and
``Examples of Airport Revenue'' sections of the proposed policy, as
discussed above.
Paragraph C of the Applicability section in the proposed policy
addresses the sale, or other transfer of ownership or control, of a
publicly owned airport. Paragraph C states that such a transfer would
require FAA approval in accordance with the AIP sponsor assurances and
general government contract law principles. Because the proceeds of a
sale or other transfer of airport property are considered airport
revenue, the FAA would condition its approval of the transfer on the
parties' assurance that the proceeds of sale will be dedicated to
airport use. However, the FAA would take into consideration the
specific elements of the proposed transfer, in determining what action
would represent appropriate and sufficient compliance with the revenue
use requirements of 49 U.S.C. 47107(b) under the circumstances. The FAA
also invites the parties to a prospective transfer of airport property
to discuss with the FAA, as early as possible in the planning stages,
the effect of Federal requirements on the proposed transaction. There
is no intent to hinder or prevent additional private participation in
the ownership, operation, or financing of airports. The FAA welcomes
proposals to do so and is committed to working with interested parties
to ensure compliance with Federal laws and regulations.
Recoupment of Unreimbursed Capital or Operating Costs of the
Airport
In 1990, the FAA and the Department sought the assistance of the
United States Department of Justice, Office of Legal Counsel (DOJ) in
applying section 511(a)(12) to the situation in which an airport
sponsor seeks to use airport revenue to recoup past unreimbursed
contributions to the capital and operating costs of the airport. The
issue arose from a request to the FAA from Albany County, New York to
transfer the Albany County Airport to a private joint venture. The
joint venture proposed to lease the airport for 40 years, with an
option to renew. In exchange for the lease, the County was to receive
annual lease payments, which would be applied to the airport. In
addition, it was to receive an initial payment of $30 million, which
would be applied for general expenditures. The joint venture planned to
recoup the $30 million payment and lease payment from landing fees or
other airport generated revenues. Albany County justified the use of
the $30 million for general expenditures under section 511(a)(12) on
the grounds that the County had made unreimbursed contributions to the
airport of equal or greater amounts.
Prior to the Albany proposal, the FAA had not construed section
511(a)(12) to permit recoupment in the circumstances described by
Albany. After reviewing the statute, its legislative history and
purpose, the DOJ advised, in a memorandum dated February 12, 1991, that
section 511(a)(12) did not preclude recoupment of a sponsor's past
unreimbursed contributions to the capital and operating costs of an
obligated airport. The DOJ also advised that the FAA could oversee the
rates charged to airport users by the joint venture--including the
extent to which the rates could reflect the $30 million payment to
Albany County--to ensure that these rates remained fair and reasonable.
The DOJ opinion was based on the facts of the Albany County case, where
the County sought recoupment of the amount originally contributed and
did not seek interest on that amount. To date, the FAA has not
permitted recoupment of amounts in excess of the original contribution
(or the value of land at the time of contribution). That policy
continues in effect pending issuance of a final policy statement in
this docket. In developing a final policy on revenue diversion, the FAA
will consider comments on the current agency policy on recoupment of
contributions, as well as on the implications of allowing recoupment of
not only the original contribution but also interest or an inflationary
adjustment, or, in the case of original contributions in the form of
land, allowing recoupment of the current market or inflation-adjusted
value of the contributed land.
Petition for Rulemaking by Lehigh-Northampton Airport Authority
On April 3, 1995, the FAA received a Petition for Notice and
Comment rule Making filed by counsel on behalf of Lehigh-Northampton
Airport Authority, the owner and operator of Lehigh Valley
International Airport. Petitioner urged the agency to provide for
``pre-enforcement'' notice and comment procedures prior to the
promulgation of this policy statement. While styled a petition for
rulemaking, petition's submission does not urge the adoption of any
particular rule. Rather, the petition could be more accurately
described as a legal memo supporting the use of notice and comment
rulemaking procedures in the promulgation of this policy.
Technically, the policy statement is not rulemaking and does not
require advance publication or public comment before issuance. However,
to the extent the petition requests that the FAA's revenue diversion
policy statement be issued as a proposal for public comment before
adoption, the petition is granted. While the proposed policy statement
is not made effective at this time, it should be recognized that
longstanding statutory requirements relating to the use of airport
revenue remain in effect and will be enforced. Airport sponsors may
assume that the FAA would act consistently with the views expressed in
this document in any enforcement action for revenue diversion taken
before a final policy statement is published.
Policy Statement Concerning Airport Revenue
For the reasons discussed above, the Federal Aviation
Administration proposes to adopt the following statement of policy
concerning the use of airport revenue:
Policies and Procedures Concerning the Use of Airport Revenue
I. Introduction
The Federal Aviation Administration (FAA) issues this document to
fulfill the statutory provisions in section 112 of the Federal Aviation
Administration Authorization Act of 1994, Public Law 103-305 (August
23, 1994), 49 U.S.C. 47107(l), to establish policies and procedures on
the generation and use of airport revenue. The sponsor assurance
prohibiting the unlawful diversion of airport revenues, also known as
the revenue retention requirement, was first mandated by Congress in
1982. Simply stated, the purpose of that assurance, now codified at 49
U.S.C. 4710(b), is to prevent an airport owner or operator receiving
Federal assistance from using airport revenues for expenditures
unrelated to the airport. The policies outlined in this Policy
Statement generally reflect the standards that the FAA has
traditionally applied in determining whether airport revenue use is
consistent with Federal requirements.
II. Applicability of the Policy
A. The policy and procedures on the use of airport revenue are
applicable to all public agencies that have received a grant for
airport development since September 3, 1982, under the Airport and
Airway Improvement Act of 1982
[[Page 7140]]
(AAIA), as amended repealed and recodified without substantive change
Public Law 103-272 (July 5, 1994), 49 U.S.C. 47101, et seq. Grants
issued under that statutory authority are commonly referred to as
Airport Improvement Program (AIP) grants.
B. The policies and procedures do not apply to:
1. Operators of privately-owned airports that have received grants
while under private ownership;
2. Operators of publicly-owned airports that have received grants
only for planning (i.e., not for land acquisition or development/
construction of facilities).
C. FAA approval of the sale, or other transfer of ownership or
control, of a publicly owned airport is required in accordance with the
AIP sponsor assurances and general government contract law principles.
The proceeds of a sale of airport property are considered airport
revenue (except in the case of property acquired with Federal
assistance, the sale of which is subject to other restrictions under
the relevant grant contract or deed). When the sale proposed is the
sale of an entire airport as an operating entity, the request may
present the FAA with a complex transaction in which the disposition of
the proceeds of the transfer is only one of many considerations. In its
review of such a proposal, the FAA would condition its approval of the
transfer on the parties' assurances that the proceeds of sale will be
used for the purposes required under section 4717(b). Because of the
complexity of an airport sale or privatization, the provisions for
ensuring that the proceeds are used for the purposes of section
47107(b) may need to be adapted to the special circumstances of the
transaction. For example, in the sale of a public airport to a private
entity, FAA assumes that the public owner could not simply retain all
proceeds for general use; however, it may also be inappropriate to
simply return the proceeds to the private buyer to use for operation of
the airport. Accordingly, the disposition of the proceeds would need to
be structured to meet the requirements of section 47107(b) given the
special conditions and constraints imposed by the fact of a change in
airport ownership. In considering and approving such requests, the FAA
will remain open and flexible in specifying conditions on the use of
revenue that will protect the public interest and fulfill the
requirements and objectives of section 47107(b) without unnecessarily
interfering with the appropriate privatization of airport
infrastructure.
It is not the intention of the FAA to effectively bar airport
privatization initiatives through application of the statutory
requirements for use of airport revenue. Proponents of a proposed
privatization or other sale of airport property clearly will need to
consider the effects of Federal statutory requirements on the use of
airport revenue, fair and reasonable fees for airport users,
disposition of airport property, and other policies incorporated in
Federal grant agreements. The FAA assumes that the proposals will be
structured from the outset to comply with all such requirements, and
this proposed policy is not intended to add to the considerations
already involved in a transfer of airport property.
Privatization proposals can be expected to be subject to great
individual variation, however, and it may be difficult for prospective
parties to a particular proposal to determine how the proposed
transaction might be affected by various Federal requirements,
including restrictions on the use of airport revenue. While any
transfer of airport property or change of sponsorship at a Federally
assisted airport will require FAA approval before implementation, the
FAA invites parties to a prospective proposal for privatization or
transfer of an entire airport to contact the FAA as early as possible
in the process. At an early stage in the planning process the FAA could
discuss the effect of Federal requirements and identify revisions that
would avoid potential problems for the parties.
Early contact on prospective transfers would also assist the FAA.
The FAA has received very few inquiries about specific proposals for
the privatization of an entire airport, and we would welcome
discussions on the effects of various requirements on any such
transaction. (We note that the consideration by Orange County,
California, of the sale of John Wayne Airport involved a transaction
between two county agencies and did not involve a transfer to a private
owner.) Discussion with parties interested in potential airport
privatization projects will assist the FAA in developing future policy
that promotes the objectives of Administration policy on public-private
partnership for infrastructure development.
III. Related Requirements
A. Policy on Airport Rates and Charges
Before receiving an AIP grant for airport development, the sponsor
must assure, pursuant to 49 U.S.C. 47107(a)(1), that the airport will
be made available on fair and reasonable terms without unjust
discrimination. Title 49 of the U.S.C. 47107(a)(13), similarly
obligates the sponsor to maintain a fee and rental structure that will
make the airport as self-sustaining as possible under the circumstances
existing at the airport.
Pursuant to section 113 of the Federal Aviation Administration
Authorization Act of 1994, the Federal Aviation Administration, in
conjunction with the Office of the Secretary of Transportation, has
established a ``Policy Regarding Airport Rates and Charges,'' for use
in determining whether an airport fee is reasonable. This policy lists
and explains the principles that the Department of Transportation (DOT)
and the FAA use in defining Federal policy with respect to fair and
reasonable, and not unjustly discriminatory airport fees charged by
Federally-assisted airports to air carriers and other aeronautical
users. See, 60 FR 6906 (February 3, 1995); 60 FR 47012 (September 8,
1995). The policy also addresses the obligation to make the airport as
self-sustaining as possible.
B. The 1994 and 1995 DOT Appropriations Acts
Section 328 of the 1994 DOT Appropriations Act and section 325 of
the 1995 DOT Appropriations Act included provisions mandating that no
funds provided by the Acts (i.e., all transportation funding) be made
available to any State, municipality, or subdivision ``* * * that
[unlawfully] diverts revenue generated by a public airport.'' See,
Public Law 103-122, 107 Stat. 1223 (October 27, 1993), and Public Law
103-331, 108 Stat. 2492 (September 30, 1994).
C. Rulemaking Proceedings
1. 14 C.F.R. Part 302, Subpart F--Rules Applicable to Proceedings
Concerning Airport Fees
Also pursuant to section 113, the DOT recently published procedural
rules for handling complaints by air carriers and foreign air carriers
seeking a determination of the reasonableness of certain airport fees.
It also establishes rules that would apply to requests by the owner or
operator of an airport for such a determination. See, 60 FR 6919
(February 3, 1995).
2. Proposed 14 C.F.R. Part 16, ``Rules of Practice for Federally
Assisted Airport Proceedings
On June 9, 1994, a notice of proposed rulemaking was issued to
establish rules of practice for the filing of complaints and
adjudication of compliance matters
[[Page 7141]]
involving Federally assisted airports. Pending completion of that
rulemaking, FAA continues to employ existing 14 C.F.R. Part 13. See,
section on ``Sanctions for Noncompliance,'' below. See also, 59 FR
29880 (June 9, 1994); 59 FR 47568 (September 16, 1994).
D. Reporting Airport Financial Data
The format to be used in reporting certain financial data in
accordance with section 111(a)(4) of the 1994 Authorization Act, 49
U.S.C. 47107(a), is currently being developed.
E. Compliance Supplement for Single Audits of State and Local
Governments
In an effort to augment FAA's revenue monitoring capabilities, the
agency intends to review and amend, as necessary, the audit procedures
set forth in the Compliance Supplement for Single Audits of State and
Local Governments to address the use of airport revenue. The FAA
believes that the inclusion of appropriate indicators of revenue
diversion in the suggested procedures for independent financial audits
will enhance the effectiveness of agency compliance efforts.
IV. Statutory Requirements for the Use of Airport Revenue
A. The General Requirement, 49 U.S.C. Sec. 47107(b)
The current provisions restricting the use of airport revenue are
found at 49 U.S.C. 47107(b), as amended by Public Law 103-305. These
provisions require the Secretary, prior to approving a project grant
application for airport development, to obtain written assurances.
Subsection (b)(1) requires the airport owner or operator to assure
that:
* * * local taxes on aviation fuel (except taxes in effect on
December 30, 1987) and the revenues generated by a public airport
will be expended for the capital or operating costs of--
(A) the airport;
(B) the local airport system; or
(C) other local facilities owned or operated by the airport
owner or operator and directly and substantially related to the air
transportation of passengers or property.
49 U.S.C. 47107(b)(1).
Subsection (b)(2) provides an exception to the requirements of
Subsection (b)(1) for airport owners or operators having certain
financial arrangements in effect prior to the enactment of the AAIA.
This provision is commonly referred to as the ``grandfather''
provision. It states:
Paragraph (1) of this subsection does not apply if a provision
enacted not later than September 2, 1982, in a law controlling
financing by the airport owner or operator, or a covenant or
assurance in a debt obligation issued not later than September 2,
1982, by the owner or operator, provides that the revenues,
including local taxes on aviation fuel at public airports, from any
of the facilities of the owner or operator, including the airport,
be used to support not only the airport but also the general debt
obligations or other facilities of the owner or operator.
49 U.S.C. 47107(b)(2).
B. New Statutory Revenue Diversion Prohibitions
In section 112 of the FAA Authorization Act of 1994, 49 U.S.C.
Sec. 47107(l)(2) (A-D), Congress expressly prohibited the diversion of
airport revenues through:
1. Direct payments or indirect payments, other than payments
reflecting the value of services and facilities provided to the
airport;
2. Use of airport revenues for general economic development,
marketing, and promotional activities unrelated to airports or airport
systems;
3. Payments in lieu of taxes or other assessments that exceed the
value of services provided; or
4. Payments to compensate non-sponsoring governmental bodies for
lost tax revenues exceeding stated tax rates.
C. Passenger Facility Charges and Revenue Diversion
The Aviation Safety and Capacity Expansion Act of 1990 authorized
the imposition of a passenger facility charge (PFC) of up to $3 per
enplaned passenger, with the approval of the Secretary.
While PFC revenue is not characterized as ``airport revenue'' for
purposes of this policy, specific statutory and regulatory guidelines
govern the use of PFC revenue, as set forth at 49 U.S.C. 40117,
``Passenger Facility Fees,'' and 14 CFR Part 158, ``Passenger Facility
Charges'' (for purposes of this policy, the terms ``passenger facility
fees'' and ``passenger facility charges'' are synonymous). These
provisions are more restrictive than 49 U.S.C. 47107(b), in that they
provide that PFC revenue may only be used to finance the allowable
costs of approved projects. The PFC regulation specifies the kinds of
projects that can be funded by PFC revenue and the objectives these
projects must achieve to receive FAA approval for use of PFC revenue.
They prohibit expenditure of PFC revenue for other than approved
projects, or collection of PFC revenue in excess of approved amounts.
V. Definitions
A. Airport Revenue
All fees, charges, rents, or other payments received by or accruing
to the sponsor (revenue) for any one of the following reasons are
considered to be ``airport revenue:''
(1) Revenue from air carriers, tenants, transferees, and other
parties. Airport revenue includes all revenue received by the sponsor
for the activities of others or the transfer of rights to others
relating to the airport, including revenue received:
(a) for the right to conduct an activity on the airport or to use
or occupy airport property;
(b) for the sale, transfer, or disposition of real airport property
not acquired with Federal assistance or personal airport property not
acquired with Federal assistance, or any interest in that property,
including sale through a condemnation proceeding;
(c) for the sale of (or sale or lease of rights in) sponsor-owned
mineral, natural, or agricultural products or water to be taken from
the airport; or
(d) for the right to conduct an activity on, or for the use or
disposition of, real or personal property or any interest therein owned
or controlled by the sponsor and used for an airport-related purpose
but not located on the airport;
(2) Revenue from sponsor activities. Airport revenue generally
includes all revenue received by the sponsor for activities conducted
by the sponsor itself as airport owner and operator, including revenue
received:
(a) from any activity conducted by the sponsor on airport property
acquired with Federal assistance;
(b) from any aeronautical activity conducted by the sponsor; or
(c) from any nonaeronautical activity conducted by the sponsor on
airport property not acquired with Federal assistance, up to an amount
appropriately attributable to the use of the property (such as the
amount of rent that would be charged a commercial tenant).
B. Unlawful Revenue Diversion
Unlawful revenue diversion is the use of airport revenue for
purposes other than the capital or operating costs of the airport, the
local airport system, or other local facilities owned or operated by
the airport owner or operator and directly and substantially related to
the air transportation of passengers or property, unless that use is
grandfathered under 49 U.S.C. 47107(b)(2) and the use does not exceed
the limits of the `grandfather' clause. When such use is so
grandfathered, it is known as lawful revenue diversion.
In many cases, in their consideration of the many details of a
particular airport's financial decisions and use of airport funds, the
FAA or the OIG may
[[Page 7142]]
find that the airport could have obtained a higher value for use of
airport property by the sponsor, or could have paid the sponsor less
for administrative services to the airport, for example. Technically,
the difference in actual and ideal amounts could be considered unlawful
revenue diversion under this policy. However, the FAA will not devote
enforcement resources to situations in which the amounts involved are
insignificant.
VI. Examples of Airport Revenue
A. Airport revenue includes, but is not limited to, revenue from:
1. service fees, landing fees, usage fees, fuel flowage fees;
2. proceeds from lease, rental, or other contractual agreements
relating to the airport;
3. proceeds from the sale of fuel or other aviation products or
services by the sponsor;
4. local taxes on aviation fuel enacted after December 30, 1987;
5. interest earned on investment of surplus, escrowed, or
restricted airport funds;
6. subject to the Applicability provisions and except as provided
for in subparagraph B., below, sale of airport property shown on the
airport property map (commonly referred to as the Exhibit A in the
grant application submission) including condemnation of property for
another public purpose; and,
7. net income received from Federal surplus property conveyed to
the sponsor for the development of income from non-aviation businesses.
B. While not considered to be airport revenue, the proceeds from
the sale of land donated by the United States or acquired with Federal
grants must be used in accordance with the agreement between the FAA
and the sponsor. Where such an agreement gives the FAA discretion, FAA
may consider this policy as a relevant factor in specifying the
permissible use or uses of the proceeds.
VII. Uses of Airport Revenue
A. Permitted Uses of Airport Revenue
Airport revenue may be used for:
1. The capital or operating costs of the airport, the local airport
system, or other local facilities owned or operated by the airport
owner or operator and directly and substantially related to the air
transportation of passengers or property. Such costs may include
reimbursements to a state or local agency for the costs of services
actually received and documented, subject to the terms of this policy
statement. Operating costs for an airport may be both direct and
indirect and may include all of the expenses and costs that are
recognized under the generally accepted accounting principles and
practices that apply to the airport enterprise funds of state and local
government entities.
2. The repayment to the airport owner (which may or may not be the
sponsor) of funds contributed by the owner for capital and operating
costs of the airport and not heretofore reimbursed.
3. Purposes other than capital and operating costs of the airport,
the local airport system, or other local facilities owned or operated
by the sponsor and directly and substantially related to the air
transportation of passengers or property, if the ``grandfather''
provisions of 49 U.S.C. 47107(b)(2) are applicable to the sponsor and
the particular use. Examples of grandfathered airport sponsors may
include, but are not limited to, a port authority or state department
of transportation which owns or operates other transportation
facilities in addition to airports, and which have pre-September 3,
1982, debt obligations or legislation governing financing and providing
for use of airport revenue for non-airport purposes. Such sponsors may
have obtained legal opinions from their counsel to support a claim of
grandfathering. Previous DOT interpretations have found the following
examples of pre-AAIA legislation to provide for the grandfather
exception:
(a) Bond obligations and city ordinances requiring a five percent
``gross receipts'' fee from airport revenues. The payments were
instituted in 1954 and continued in 1968.
(b) A 1955 state statute for the assessing of a five percent
surcharge on all receipts and deposits in an airport revenue fund to
defray central service expenses of the state.
(c) City legislation authorizing the transfer of a percentage of
airport revenues, permitting an airport-air carrier settlement
agreement providing for annual payments to the city of 15 percent of
the airport concession revenues.
(d) A 1957 state statutory transportation program governing the
financing and operations of a multi-modal transportation authority,
including airport, highway, port, rail, and transit facilities, wherein
state revenues, including airport revenues, support the state's
transportation-related, and other, facilities. The funds flow from the
airports to a state transportation trust fund, composed of all ``taxes,
fees, charges, and revenues'' collected or received by the state
department of transportation.
(e) A port authority's 1956 enabling act provisions specifically
permitting it to use port revenue, which includes airport revenue, to
satisfy debt obligations and to use revenues from each project for the
expenses of the authority. The act also exempts the authority from
property taxes but requires annual payments in lieu of taxes to several
local governments and gives it other corporate powers. A 1978 trust
agreement recognizes the use of the authority's revenue for debt
servicing, facilities of the authority, its expenses, reserves, and the
payment in lieu of taxes fund.
B. Consideration of Lawful Diversion of Revenues in Awarding
Discretionary Grants
Airport owners or operators who lawfully divert airport revenue in
accordance with the ``grandfather'' provision should be aware that 49
U.S.C. 47115(f) requires the Secretary of Transportation to consider
such usage as a factor militating against the approval of an
application for discretionary funds when, in the airport's fiscal year
preceding the date of application for discretionary funds, the
Secretary finds that the amount of revenues used by the airport for
purposes other than capital or operating costs exceeds the amount used
for such purposes in the airport's first fiscal year ending after
August 23, 1994, adjusted by the Secretary for changes in the Consumer
Price Index of All Urban Consumers published by the Bureau of Labor
Statistics of the Department of Labor.
VIII. Prohibited Uses of Airport Revenue
Prohibited uses of airport revenue include but are not limited to:
A. Direct or indirect payments, other than payments that reflect
the value of services and facilities provided to the airport, that are
not based on a reasonable, transparent cost allocation formula
calculated consistently for other units or cost centers of government.
B. Use of airport revenues for general economic development,
marketing, and promotional activities unrelated to airports or airport
systems.
C. Payments in lieu of taxes, or other assessments, that exceed the
value of services provided or are not based on a reasonable,
transparent cost allocation formula calculated consistently for other
units or cost centers of government.
D. Payments to compensate nonsponsoring governmental bodies for
lost tax revenues exceeding stated tax rates.
[[Page 7143]]
E. Loans of airport funds to a state or local agency at less than
the prevailing rate of interest.
F. Land rental to, or use of land by, the sponsor for
nonaeronautical purposes at less than the amount that would be charged
a commercial tenant.
G. Impact fees assessed by a nonsponsoring governmental body that
the airport sponsor is not obligated to pay or that exceed such fees
assessed against commercial or other governmental entities.
IX. Monitoring and Compliance
A. Detection of Revenue Diversion
To detect whether airport revenue has been diverted from an
airport, the FAA will depend primarily upon four sources of
information:
1. Annual report on revenue use submitted by the sponsor under the
provisions of 49 U.S.C. 47107(a)(19), as amended;
2. Findings of annual single audits conducted in accordance with
OMB Circular A-128, ``Audits of State and Local Governments;''
3. Investigation following a third party complaint; and
4. DOT Office of Inspector General audits.
B. Investigation of Revenue Diversion: No Formal Complaint Filed
When no formal complaint has been filed, but the FAA has an
indication from one or more of these sources that airport revenue has
been or is being diverted unlawfully, the FAA will notify the sponsor
of the possible diversion and request that it respond to the FAA's
concerns. The FAA action will depend on the response received from the
sponsor:
1. Admission of unlawful revenue diversion. If the sponsor admits
to unlawful diversion, the FAA will require the diverted amount and
associated interest to be remitted to the airport account within a
reasonable period of time. If the sponsor complies, the FAA will take
no further action.
2. Denial of revenue diversion or claim that diversion is
``grandfathered.'' If the sponsor denies that it has diverted airport
revenue, or asserts that the diversion at issue is lawful under the
exemption provisions of 49 U.S.C. 47107(b)(2), as amended, the FAA will
review the information and arguments submitted by the sponsor.
(a) If the FAA determines that there is no unlawful diversion of
revenue, the FAA will notify the sponsor and take no further action.
(b) If the FAA makes a preliminary finding that there has been
diversion of airport revenue not exempted under Section 47107(b)(2),
and the sponsor accepts that determination, the FAA will request the
sponsor to take corrective action. If the sponsor complies, the FAA
will take no further action.
3. Continuing dispute. If the FAA makes a preliminary finding that
there has been diversion of airport revenue not exempted under Section
47107(b)(2), and the sponsor continues to dispute the FAA preliminary
determination or does not take the corrective action requested by the
FAA, the FAA will complete its investigation.
(a) If the FAA ultimately finds no occurrence of unlawful revenue
diversion, the FAA will notify the sponsor and take no further
enforcement action.
(b) If, after further investigation determined to be necessary, the
FAA finds that there is reason to believe that there is or has been
unlawful diversion of airport revenue that the sponsor refuses to
terminate or correct, the FAA will issue an appropriate order proposing
enforcement action.
4. Audit or investigation by the Office of the Inspector General.
An indication of revenue diversion brought to the attention of the FAA
in a report of audit or investigation issued by the DOT Office of the
Inspector General (OIG) will be handled in accordance with paragraphs
B.1 through B.3 above. However, the FAA will first respond to the OIG
in accordance with established agency procedures and will resolve
outstanding issues in the report before notifying the sponsor of the
contents of the report and seeking corrective action.
C. Complaints Filed Under 14 CFR Part 13
When a formal complaint is filed against a sponsor for revenue
diversion, the FAA will follow the procedures in part 13 for service of
the complaint on the sponsor and investigation of the complaint. After
review of submissions by the parties, investigation of the complaint,
and any additional process provided in a particular case, the FAA will
either dismiss the complaint or issue an appropriate order proposing
enforcement action.
D. The Administrative Enforcement Process
Currently, enforcement of the requirements imposed on sponsors as a
condition of the acceptance of Federal grant funds or property is
accomplished through the administrative procedures set forth in 14
C.F.R. part 13, ``Investigation and Enforcement Procedures.'' Under
part 13, the FAA has the authority to receive complaints, conduct
informal and formal investigations, compel production of evidence, and
adjudicate matters of compliance within the jurisdiction of the
Administrator. If, as a result of the investigative processes described
in paragraphs B and C above, the FAA finds that there is reason to
proceed with enforcement action against a sponsor for unlawful revenue
diversion, an order proposing enforcement action is issued by the FAA
and under 14 C.F.R. 13.20. That section provides for the opportunity
for a hearing on the order.
E. Sanctions for Noncompliance
As explained above, if the FAA makes a preliminary finding that
airport revenue has been unlawfully diverted and the sponsor declines
to take the corrective action (which usually would involve crediting
the diverted amount to the airport account with interest), the FAA will
propose enforcement action. A decision whether to issue a final order
making the action effective is made after hearing, if a hearing is
elected by the respondent. The actions required by or available to the
agency for enforcement of the prohibitions against unlawful revenue
diversion are:
1. Withhold future grants. The Secretary may withhold approval of
an application in accordance with 49 U.S.C. 47106(e) if the Secretary
provides the sponsor with an opportunity for a hearing and, not later
than 180 days after the later of the date of the grant application or
the date the Secretary discovers the noncompliance, the Secretary finds
that a violation has occurred. The 180-day period may be extended by
agreement of the Secretary and the sponsor or in a special case by the
hearing officer.
2. Withhold approval of the modification of existing grant
agreements that would increase the amount of funds available. A
supplementary provision in section 112 of the 1994 Authorization Act,
49 U.S.C. 47111(e), makes mandatory not only the withholding of new
grants but also withholding of a modification to an existing grant that
would increase the amount of funds made available, if the Secretary
finds a violation after hearing and opportunity to cure.
3. Withhold payments under existing grants. The Secretary may
withhold a payment under a grant agreement for 180 days or less after
the payment is due without providing for a hearing. However, in
accordance with 49 U.S.C. 47111(d), the Secretary may withhold a
payment for more than 180 days only if he or she notifies the sponsor
and
[[Page 7144]]
provides an opportunity for a hearing and finds that the sponsor has
violated the agreement. The 180-day period may be extended by agreement
of the Secretary and the sponsor or in a special case by the hearing
officer.
4. Withhold approval of an application to impose a passenger
facility charge. Section 112 also makes mandatory the withholding of
approval of any new application to impose a passenger facility charge
under 49 U.S.C. 40117. Subsequent to withholding, applications could be
approved only upon a finding by the Secretary that corrective action
has been taken and that the violation no longer exists.
5. Terminate availability of all Federal transportation funds
appropriated in Fiscal Years 1994 and 1995. Provisions of the DOT
Appropriations Acts for Fiscal Years 1994 and 1995 prohibit the award
of funds to a state or local subdivision that diverts revenue generated
by a public airport. This provision would prohibit payment on any
Federal transportation grant, including grants for highway and transit
projects.
6. File suit in United States district court. Section 112(b)
provides express authority for the agency to seek enforcement of an
order in Federal court.
7. Assess civil penalties. Under section 112(c) of Public Law 103-
305, codified at 49 U.S.C. 46301(a) and (d), the Secretary has
statutory authority to impose civil penalties up to a maximum of
$50,000 on airport sponsors for violations of the AIP sponsor assurance
on revenue diversion. The Secretary intends to use this authority only
after the airport sponsor has been given a reasonable period of time,
after a violation has been clearly identified to the airport sponsor,
to take corrective action to restore the funds or otherwise come into
compliance before a penalty is assessed, and only after other
enforcement actions, such as withholding of grants and payments, have
failed to achieve compliance. Any civil penalty action under this
section would be adjudicated under 14 C.F.R. part 13, Subpart G.
Issued in Washington, DC on February 20, 1996.
David L. Bennett,
Director, Office of Airport Safety and Standards.
[FR Doc. 96-4270 Filed 2-23-96; 8:45 am]
BILLING CODE 4910-13-M
