[Federal Register Volume 62, Number 77 (Tuesday, April 22, 1997)]
[Notices]
[Pages 19638-19646]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-10355]
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DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
[Docket No. 28895]
Airport Privatization Pilot Program: Application Procedures
AGENCY: Federal Aviation Administration (FAA), DOT.
ACTION: Notice of proposed procedures; notice of public meeting.
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SUMMARY: Section 149 of the Federal Aviation Authorization Act of 1996
establishes an airport privatization pilot program, and authorizes the
Department of Transportation to grant exemptions from certain Federal
statutory and regulatory requirements for up to five airport
privatization projects. This notice identifies the issues the
Department will need to consider in granting exemptions and approving
the transfer of a public use airport under the program, and proposes
application procedures to be used by interested public airport sponsors
and private parties to apply for inclusion in the program. A public
meeting will be held on the proposed procedures on Wednesday, May 21,
1997.
DATES: Comments must be received by June 4, 1997. The public meeting
will be held on May 21, 1997 at FAA headquarters, 800 Independence
Avenue SW., Washington, DC; 3rd Floor auditorium; telephone: (202) 267-
8728.
Registration: 8:30 a.m.; Meeting: 9:00 a.m.-1:00 p.m. Please note:
Please allow time to go through FAA building security.
ADDRESSES: Comments should be mailed, in quadruplicate, to: Federal
Aviation Administration, Office of Chief Counsel, Attention: Rules
Docket (AGC-200), Docket No. 28895, 800 Independence Avenue, SW.,
Washington, DC 20591. All comments must be marked: ``Docket No.
28895.'' 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. 28895.'' 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. To request to be
[[Page 19639]]
included on the list of speakers at the public meeting, call Kevin
Hehir AAS-310, (202) 267-8224.
SUPPLEMENTARY INFORMATION:
Introduction and Background
This proposal of application procedures to be used by applicants
for an airport privatization project is being published pursuant to
Sec. 149 of the Federal Aviation Administration Authorization Act of
1996, Pub. L. No. 104-264 (October 9, 1996) (1996 Reauthorization Act),
which adds a new Sec. 47134 to Title 49 of the U.S. Code. Section 47134
authorizes the Secretary of Transportation, and through delegation, the
FAA Administrator, to exempt a sponsor of a public use airport that has
received Federal assistance, from certain Federal requirements in
connection with the privatization of the airport by sale or lease to a
private party. Specifically, the Administrator may exempt the sponsor
from all or part of the requirements to use airport revenues for
airport-related purposes, to pay back a portion of Federal grants upon
the sale of an airport, and to return airport property deeded by the
Federal Government upon transfer of the airport. The Administrator is
also authorized to exempt the private purchaser or lessee from the
requirement to use all airport revenues for airport-related purposes,
to the extent necessary to permit the purchaser or lessee to earn
compensation from the operations of the airport.
In addition to proposing application procedures, this notice
describes the issues the FAA will consider in determining whether to
approve an application for an exemption under Sec. 47134 and other
Federal requirements for airport operation. The term ``public sponsor''
is used in this document to mean the governmental agency or authority
that currently owns or operates a public airport and proposes to sell
or lease it to a private purchaser or lessee. The term ``private
operator'' is used to refer to a private firm or firms that propose to
purchase or lease a public use airport under the program; the term
``applicant'' means all of the parties jointly participating in the
application for privatization of a particular airport.
Requirements for Transfer of a Federally-Assisted Public Airport
A request for transfer of the operation of an airport from an
existing public sponsor to a new operator, whether public or private,
requires FAA approval. The request for exemption under Sec. 47134 would
be considered in conjunction with existing approval requirements and
processes.
Grant/Deed Conditions
Airport sponsors receiving Federal assistance under a grant program
or through donation of surplus property agree as a condition of the
assistance to obtain FAA approval before transferring control or
ownership of the airport to another party. For example, Assurance No.
5.b. in Airport Improvement Program (AIP) grant agreements provides
that a sponsor will not sell, lease, or otherwise transfer any part of
its title or other interests in the airport property subject to the
grant assurances, for the duration of the term of the grant agreement,
without approval by the Secretary. Assurance No. 5 further provides
that the sponsor and the transferee approved by the Secretary shall
insert in the contract or document transferring the sponsor's interest,
and make binding upon the transferee, all of the terms, conditions and
assurances contained in the sponsor's grant agreement. Similar
conditions are written into the deeds of conveyance for Federal surplus
property donated to an airport sponsor.
In reviewing a request for transfer, the FAA will consider whether
the new owner/operator will assume the obligations of the original
sponsor under existing grant agreements or deeds, and whether the new
owner/operator has the powers and authority to fulfill its obligations
under the assurances.
Regulatory Requirements
An operator of an airport receiving air service by aircraft with
more than 30 passenger seats must hold an FAA operating certificate
under 14 C.F.R. Part 139. Authority to certificate airports served by
aircraft with 9 or more passenger seats was granted to the FAA in the
1996 Reauthorization Act. FAA operating certificates are not
transferable; a new operator of a certificated airport must obtain a
new certificate issued by the FAA.
Section 47134
Section 47134 contains specific provisions for issuance of an
exemption in connection with a transfer of airport operation. These
conditions supplement and to some extent overlap the factors that FAA
would consider under Assurance No. 5.b., but do not replace other
requirements for approval of an airport transfer. In summary,
Sec. 47134 provides that the Administrator may issue exemptions to a
public sponsor and a private sponsor only if the Administrator finds
that the sale or lease agreement contains provisions satisfactory to
the Administrator to ensure that:
(1) The airport will continue to be available for public use on
reasonable terms and conditions without unjust discrimination;
(2) The operation of the airport will not be interrupted if the
private operator experiences bankruptcy or other financial difficulty;
(3) The private operator will ``maintain, improve, and modernize''
airport facilities through capital investments, and submit a plan for
these actions;
(4) Airport fees imposed on air carriers will not increase faster
than inflation unless a higher amount is approved by at least 65
percent of the air carriers using the airport and the air carriers
having at least 65 percent of the landed weight of aircraft at the
airport;
(5) Fees imposed on general aviation operators will not exceed the
percentage increase in fees imposed on air carriers;
(6) Safety and security will be maintained ``at the highest
possible levels;''
(7) Adverse effects of noise from operations at the airport will be
mitigated to the same extent as at a public airport;
(8) Adverse effects on the environment from airport operations will
be mitigated to the same extent as at a public airport; and
(9) Collective bargaining agreements that cover airport employees
on the date of the sale or lease.
In addition, the Administrator must find that the transfer will not
result in unfair and deceptive trade practices or unfair methods of
competition.
Number of Participating Airports
In establishing the privatization pilot program, Congress placed
limitations on the number and kind of airports eligible to participate.
Paragraph 47134(d)(1) provides that if the applications of 5 airports
are approved, then one must be a general aviation airport. Paragraph
47134(d)(2) provides that no more than one of the airports approved may
be an airport with more than 1 percent of total passenger boardings (a
large hub airport), as defined in 49 U.S.C. Sec. 47102(10).
Process for Applying for an Exemption Under Section 47134
This part of the notice summarizes the FAA's proposed procedures
for applying for an exemption under 49 U.S.C. Sec. 47134, including the
information required from applicants and the process for agency
handling of requests. Final guidance on application
[[Page 19640]]
procedures will be issued after a review of public comments on this
notice.
Substantive issues the FAA believes need to be considered in the
issuance of an exemption and approval of transfer are discussed below
(see section titled, Issues Considered By the FAA in Granting an
Exemption Under Sec. 47134) as further guidance for applicants.
Exemption Application and Review Process: Overview
Subject to revision after review of public comment, the FAA intends
to apply the following policies to the process for filing and review of
requests for privatization of a public airport:
1. A request for participation in the airport privatization pilot
program will be initiated by the filing of an application for exemption
under Sec. 47134(a).
2. With the exception noted below, applications for exemption will
be accepted on or after December 1, 1997, and will be handled on a
first-come first-served basis until the limits of Sec. 47134 are
reached. An otherwise qualifying application for exemption will be
accepted before December 1, 1997, if the sponsor has issued, on or
before the date of publication of this notice, a formal solicitation or
request for proposals for the sale or lease of an airport. All
applications will be evaluated in the order of receipt.
3. Participation in the program is limited to five airports. The
maximum of five participants in the program will be considered to have
been reached based on applications under review, not exemptions
granted, so that an airport with an application on file will not be in
a race for inclusion in the program.
4. An application received by the FAA will be considered to be
filed on the date received. Application packages will be date-stamped
on receipt in Room 600 East, FAA headquarters building.
5. FAA will review the application to determine if it meets the
procedural requirements stated in this notice.
6. The FAA will not accept ``placeholder'' applications filed
before the applicant has sufficient information on the proposed
transfer. If an application cannot reasonably be brought into
compliance with the requirements of Sec. 47134 and other applicable
Federal statutes with current information, the FAA will notify the
applicant that the application is rejected and that the application is
no longer on file. The applicant may file a new application at any
time, and receive a new ``on file'' date at that time.
7. If the application does meet the procedural requirements
described in this notice, the applicant will be notified that the
application is ``accepted for review.'' The FAA may request additional
information before accepting the application for review, but the
original filing date will remain in effect.
8. The FAA proposes to publish in the Federal Register a notice
that an application has been received under 49 U.S.C. Sec. 47134, and
that the FAA has accepted the application for review. The FAA will
establish a docket and accept public comment on the application for a
defined period.
9. Selection as one of the 5 airports eligible to participate in
the program will be evidenced by the issuance of an exemption under
Sec. 47134(b). If an application is approved, an exemption will be
issued after the execution of all documents necessary to fulfill the
requirements of Sec. 47134 and other laws and regulations within the
FAA's jurisdiction (e.g., issuance of a Part 139 certificate to the
private operator; FAA approval of a security program under Part 107;
and possibly a 3-way agreement between the public sponsor, the private
operator, and the FAA.
10. FAA representatives will be available to meet with parties
interested in an airport privatization project both before and after
the filing of an application for exemption to discuss the Federal
statutory requirements and policies that apply to applications under
Sec. 47134.
Filing an Application
1. Applicants must submit a complete application package containing
the information described under ``Form and Content of Applications'' in
this notice to: Susan L. Kurland, Associate Administrator for Airports,
ARP-1, Room 600 East, Federal Aviation Administration, 800 Independence
Avenue, SW., Washington, DC 20591.
2. Applications may be delivered or mailed, but will not be
considered to be ``on file'' with the FAA until received and date-time
stamped in the Office of the Associate Administrator for Airports, Room
600 East.
Form and Content of Applications
1. There is no required form for an application. However, the
application package must be submitted with a cover letter, signed
jointly by appropriate officials of the current public sponsor and the
private operator proposing to buy or lease the airport, requesting an
exemption pursuant to 49 U.S.C. Sec. 47134 for the purpose of the
privatization of an airport. Officials signing for the public sponsor
must provide evidence of their authority to file the application.
2. The following statements and information must be included in an
application. The FAA realizes that some documents, figures, and other
information will not be available until shortly before the execution of
the transfer transaction. The agency assumes that the application would
be filed after the public sponsor has selected a private operator and
reached sufficient agreement with the operator on the terms of the
transaction to represent those terms in an application. The FAA will
not require that all information listed below be provided at the time
of the application, however. For each item below for which information
is not available, the applicant may substitute a description of the
expected response and the date by which the final information will be
available. Information not provided with the application should be
submitted to the FAA as soon as it becomes available.
The Application
Part I. Parties to the Transaction
A. Name of the airport proposed for sale or lease.
B. Name and address of the public sponsor of the airport; name,
address, telephone number and fax number of the person to contact about
the application.
C. Name and address of the private operator proposing to purchase
or lease the airport; name, address, telephone number and fax number of
the person to contact about the application.
D. If the private operator proposing to purchase or lease the
airport is a partnership, joint venture, or other consortium of
multiple interests, the name and address of each of the participating
members.
E. Citizenship of the private operator and/or each member of the
private operator consortium, and percentage of interest of each such
member.
Part II. Airport Property
A. A description of the airport property to be transferred.
Applicants should describe property in sufficient detail to identify
the parcels of property and facilities to be transferred; a map and a
legal description of the property may be included but are not required.
B. A history of the acquisition of existing airport property:
applicants should include information on grants, types of deeds, the
dates and means of conveyance (e.g. Surplus Property Act), other
Federal conveyance of donated property, parcels purchased with Federal
funds and parcels purchased with only local funds.
[[Page 19641]]
Part III. Terms of the Transfer
A. A detailed description of the terms of the transfer, other than
financial, including:
The form of the transaction (sale, lease, other);
Term of the lease or other transfer agreement;
Description of any rights, authority, or interests retained by the
public sponsor, including reversion of title to facilities;
If the private operator is a consortium, a description of the
respective rights and responsibilities of each member;
B. Financial terms of the transaction:
Amounts and timing of payments to public sponsor.
Amounts of payments to sponsor to be used, respectively, for
airport purposes (including recoupment of public sponsor investments
not previously recovered) and other purposes.
Financing arrangements of the private operator for purchase payment
or initial lease payment.
Other relevant financial terms of the transfer.
C. Copies of all documents executed as part of the transfer, to be
provided as they are executed or are in sufficiently final form to
indicate the substantive nature of the expected final document.
D. If applicable, a request for confidentiality of any particular
document or information submitted, with supporting information.
Part IV. Qualifications of the Private Operator
A. Complete description of airport operations experience. If the
private operator is a newly formed entity, describe the experience of
the constituent members and the proposed management structure to
integrate operational functions.
B. Financial resources for operating/capital expenses of the
airport.
C. Timing/details of application for Part 139 certificate, if
applicable.
D. Plan for compliance with Part 107, if applicable.
E. Affiliations with air carriers or other persons engaged in
aeronautical business activity at an airport (other than airport
management).
Part V. Requests for Exemption
A. Describe the specific exemption requested by the public sponsor
under 49 U.S.C. Sec. 47134(b)(1), from the prohibition on use of
airport revenue for general purposes, including the amount of funds
involved.
B. Describe the specific exemption requested by the public sponsor
under 49 U.S.C. Sec. 47134(b)(2), from the requirement to repay Federal
grant funds or return property.
C. Describe the specific exemption requested by the private
operator under 49 U.S.C. Sec. 47134(b)(3), from the prohibition on use
of airport revenue for general purposes.
Part VI. Certification of Air Carrier Approval
A. Provide a certification that air carriers meeting the
requirements of 49 U.S.C. Sec. 47134(b)(1)(A) approve the exemption
described in Part V.A. above. ( See Granting Exemptions under the
section titled Issues Considered by the FAA in Granting An Exemption
Under Sec. 47134 for definitions and guidance.)
B. Provide a list of all air carriers serving the airport (as
described in the above mentioned section on granting exemptions), a
list of the air carriers that have approved the exemption, the total
landed weight of all air carrier aircraft at the airport within the
preceding year, and the total landed weight of the carriers that have
approved the exemption.
C. Provide a copy of each document indicating air carrier approval
of or objection to the exemption requested.
Part VII. Airport Operation and Development
A. Provide a description of how the private operator, the public
sponsor, or both will address the following issues with respect to the
operation, maintenance, and development of the airport after the
proposed transfer. (Factors the FAA will consider in reviewing
applications are discussed in this notice under the previously
mentioned section on granting exemptions below.)
1. Part 139 certification. A request for Part 139 certificate
should be filed with the local FAA regional Airports Division. The
exemption application needs only to reflect the private operator's
intentions and the status of a certificate application, if applicable.
2. Continuing access to the airport on fair and reasonable terms
and without unjust discrimination, in accordance with Sec. 47134(c)(1).
3. Continued operation of the airport in the event of bankruptcy or
other financial impairment of the private operator, in accordance with
Sec. 47134(c)(2). The application should include any provision for
reversion to the public sponsor.
4. Maintenance, improvement, and modernization of the airport, in
accordance with Sec. 47134(c)(3), including the public sponsor's most
recent 5-year capital improvement plan (CIP) and the 5-year CIP
proposed by the private operator. Applicants should identify the
sources of funds to be used for capital development, including any
continuing contributions by the public sponsor. Applicants should also
include any financial security provisions , such as a letter of credit
or performance bond, for the accomplishment of the maintenance,
improvement, and modernization projects committed to by the private
operator.
5. Compliance with the limitations on air carrier fees described in
Sec. 47134(c)(4).
6. Compliance with the limitation on general aviation fees
described in Sec. 47134(c)(5).
7. Maintenance of safety and security at the airport, in accordance
with Sec. 47134(c)(6). The application should note the applicant's
contacts with the Airports District Office on Part 139 and the Office
of Aviation Security on Part 107, but does not need to duplicate
information filed in connection with those actions.
8. Mitigation of adverse effects of noise from airport operations,
in accordance with Sec. 47134(c)(7). The applicant should specifically
describe its intentions with respect to an existing or future Part 150
noise compatibility program for the airport, with respect to the public
sponsor's commitments under past records of decisions on airport
development projects, and other measures the private operator intends
to take in the future.
9. Mitigation of adverse effects on the environment from airport
operations, in accordance with Sec. 47134(c)(8).
10. Recognition of existing collective bargaining agreements
covering employees of the public sponsor, in accordance with
Sec. 47134(c)(9).
B. The applicant's acceptance of the grant assurances contained in
the public sponsor's grant agreements with the FAA. Assurance No. 25
need not be addressed.
Part VIII. Periodic Audits
Section 47134(k) provides that the FAA may conduct periodic audits
of the financial records and operations of an airport receiving an
exemption under the pilot program.
Applicants should indicate their express assent to this provision
in the application.
Issues Considered by the FAA in Granting an Exemption Under 47134
Granting Exemptions
Section 47134(b) authorizes the Secretary, in connection with
approval of an application for transfer to a private operator, to grant
the following exemptions: From requirements governing use of airport
revenue, to the
[[Page 19642]]
extent necessary to permit the sponsor to recover from the transfer,
the amount approved by 65 percent of the carriers serving the airport
and by carriers whose landed weight at the airport in the preceding
calendar year represented 65 percent of the total landed weight at the
airport;
From any statutes, regulations or grant assurances requiring
repayment of Federal grants or the return of Federal property; and
From requirements governing use of airport revenue to the extent
necessary to permit the airport operator to earn compensation from the
operations of the airport.
The exemption authority is discretionary. The FAA will make every
effort to exercise its authority under Sec. 47134 to permit the
completion of transactions negotiated in good faith in reliance on the
statute and this guidance. The FAA notes that Sec. 47134 authorizes
exemptions only from the requirements on the use of airport revenue to
permit the private operator to earn compensation from the airports. As
discussed below, the compensation of the private operator could also be
subject to limitations based on the requirement that aeronautical fees
be reasonable. Reasonable fees are addressed separately under
Sec. 47134(g).
65 Percent Carrier Approval
The FAA proposes to apply the 65 percent approval requirement as
follows. The FAA would consider ``the carriers operating at the
airport'' to be (1) all air carriers, including air carriers operating
under 14 CFR Part 135, that are parties to a lease, use or operating
agreement with the public sponsor on the date the applicants solicit
carrier certification of agreement, and (2) any other carriers that
conducted at least 50 commercial operations in the calendar year
preceding the application. This would not include infrequent or
transient users of the airport, but would include all carriers with a
substantial interest in the fees charged and facilities provided by the
airport operator. The FAA proposes to define landed weight as the total
landed weight at the airport, as determined from records used by the
public sponsor to calculate weight-based landing fees owed by each air
carrier landing at the airport in the calendar year preceding the
filing of the application. An applicant that did not use landed weight
to calculate weight-based landing fees could request a waiver and
propose an alternate methodology.
Terms and Conditions Required for Approval--General Approach
Section 47134(c) permits the FAA to grant an exemption only upon
finding that the sale or lease agreement includes provisions
satisfactory to the FAA to ensure that nine separate statutory
objectives will be fulfilled.
With respect to some of the objectives listed in Sec. 47134(c), it
may be appropriate to rely on provisions in the sale or lease agreement
that track the general statutory language to meet the substantive
requirements of the terms and conditions. For other objectives, as
discussed below, it will be necessary for applicants to describe the
specific measures they intend to take to meet the objective. The FAA
proposes to require that the purchase or lease agreement provide that
terms and conditions included in the agreement to satisfy objectives in
Sec. 47134(c) (at least those objectives relating to safety,
environment, and reasonable access) are intended to create third party
beneficiary rights for the United States enforceable through a civil
action to obtain specific performance of the terms and conditions. The
FAA will also consider the private operator's adherence to the terms
and conditions agreed upon to meet the objectives of Sec. 47134(c), in
evaluating requests for discretionary AIP grants. These steps are
considered to be reasonably necessary for the FAA to assure that the
terms and conditions will be followed after the sale of an airport or
during the life of a lease.
The FAA solicits comment on whether any additional actions would be
appropriate. In particular, should the FAA conduct an independent
evaluation of the qualifications of the private operator similar to the
evaluation of fitness of an applicant for an air carrier economic
certificate conducted by the Department under 49 U.S.C. Secs. 41108,
41110. The FAA is proposing to require information on the proposed
airport operator's qualifications and financial resources in the
application. Commenters suggesting any other actions are requested to
include the policy or legal justification for their suggestions.
Terms and Conditions To Assure Public Access on Reasonable Terms
Without Unjust Discrimination
Section 47134(c)(1) requires the transfer agreement to include
provisions ensuring that the airport will be available for public use
on reasonable terms without unjust discrimination. The FAA has
construed a corresponding requirement in the AIP grant assurances to
require the following:
(1) that the airport be open to all members of the public for
aeronautical use on reasonable terms and conditions, without unjust
discrimination;
(2) that, subject to its physical limitations, the airport be open
to all commercial aviation service providers who meet the reasonable
terms, conditions and minimum standards adopted by the airport
proprietor, unless the airport proprietor undertakes a particular
aviation service in its own name on an exclusive basis; and
(3) that the rates, fees and charges imposed on aeronautical users
of the airport will be reasonable and not unjustly discriminatory.
The FAA would construe the assurance of access on reasonable terms
in the transfer agreement to encompass no less, even if the assurance
were framed in the general terms of the statute. The FAA invites
comment on whether more specific provisions should be required.
Reasonable Rates and Charges Imposed by Airport Operator
Other provisions in Sec. 47134 make it clear that Congress intended
the airport operator to charge only reasonable, not unjustly
discriminatory fees. For example, Sec. 47134(g) provides that an
airport operator shall not be prohibited from collecting reasonable
fees and charges from aircraft operators. In addition, an airport
operator under this provision would be subject to the Anti-Head Tax
Act, which prohibits imposition of unreasonable airport charges.
Finally, Sec. 47134 provides that consideration of the reasonableness
of fees charged at an airport under Sec. 47134 will be subject to
review under 49 U.S.C. 47129, which provides expedited procedures for
determining the reasonableness of airport fees. In light of this latter
provision, the FAA intends to apply the Policy on Airport Rates and
Charges to aeronautical fees imposed by the transferee. In addition, if
Sec. 47129's jurisdictional requirements are met, the expedited
procedures mandated by Sec. 47129 would be employed to determine the
reasonableness of disputed fees.
Reasonable Compensation for the Airport Operator
Section 47134(b)(3) authorizes the FAA to exempt the private
operator from statutory limitations on use of airport revenue to permit
the transferee to earn compensation from the operations of the airport.
No other exemptions to permit compensation are specifically mentioned
in the statute.
[[Page 19643]]
If a transferee intends to earn compensation from the aeronautical
operations of the airport, then the requirement for reasonable fees
would apply to that compensation. It is well accepted that for a fee to
be reasonable, the amount of compensation to the operator of a
facility, in the form of rate of return or return on equity included in
the fee, must also be reasonable.
The OST/FAA Policy Regarding Airport Rates and Charges (Policy)
addresses the issue of compensation to private airport owners only
briefly. As to fees for the use of the airfield, paragraph 2.4 of the
Policy provides that ``a private equity owner of an airport can include
a reasonable return on investment in the airfield.'' 61 FR 32019. A
private equity owner that has done so may not include an imputed
interest charge, as well. Policy, Par. 2.4.1(a). The Policy does not
further define a reasonable rate of return. For the use of aeronautical
facilities other than the airfield, the Policy permits the airport
owner to establish fees using any reasonable methodology. Policy, Par.
2.6, 61 FR 32020. The FAA considers Paragraph 2.6 to permit a private
equity owner of the airport to earn a reasonable return on its equity
investment in nonairfield aeronautical facilities.
The FAA does not propose to provide additional guidance, at this
time. The FAA will apply the provisions of the policy to permit a
private operator to earn, through aeronautical fees, a reasonable rate
of return on the funds it invests in aeronautical facilities at the
airport. The private operator would not be able to include in the
aeronautical fees a rate of return on its lease payments to the public
sponsor, unless agreed to by the aeronautical users. Comments are
requested on the effect of this aspect of the rates and charges policy
on proposed lease and sale transactions.
The FAA will not attempt to define as a matter of general policy
the level of a reasonable rate of return for equity owners or lessees
but would consider the issue on a case-by-case basis. Consistent with
accepted practices for determining the reasonableness of regulated
rates, the primary factor that the FAA would consider in determining a
reasonable rate of return would be the private operator's cost of
capital for its investment in the airport. The FAA requests that
commenters who disagree with this proposed case-by-case approach
propose and justify an alternative approach that could be adopted as a
matter of general policy.
Consistent with the terms of the Policy, the provisions governing
reasonable rates of return on investment need not be followed if the
private operator and aeronautical users agree to another arrangement.
Policy Par. 2.4. Such an agreement would also be subject to sections
47134(c) (4), (5), as discussed below.
Carrier Approval of Fee Increases
Section 47134(c)(4) requires the transfer agreement to include
provisions ensuring that airport fees imposed on air carriers will not
increase faster than the rate of inflation unless 65 percent of
carriers operating at the airport and air carriers whose aircraft
accounted for 65 percent of the landed weight at the airport in the
preceding calendar year approve of the increase. The FAA does not
intend to require the purchase agreement to include any more specific
language than the statutory provision. However, if a fee increase that
exceeds the rate of inflation is contemplated as part of the initial
transfer, the FAA would require that the application for approval
include proof that the requisite carrier approval has been obtained.
Another provision of Sec. 47134 requires the airport operator to
commit to making capital investments in the airport. Consistent with
that provision, the FAA does not intend to apply Sec. 47134(c) to fee
increases that are attributable solely to inclusion of new investments
in the airport rate base. If the 65 percent approval requirement were
to apply to fee increases caused by new capital improvements, the
requirement would give air carriers an effective veto over those
capital improvements, since investors could not be expected to put
capital into a project that is legally barred from generating
sufficient revenue to earn a return on investment. Thus, an
interpretation of the 65 percent approval requirement to apply to fee
increases attributable solely to new investment at the airport would
frustrate implementation of the statutory provision requiring the
airport operator to commit to making capital investment at the airport.
The FAA, therefore, intends to permit fee increases based solely on new
capital investment at the airport to occur without 65 percent air
carrier approval. Existing majority-in-interest clauses and similar
agreements would continue in effect, however. Comments are requested on
the effect of this interpretation of the 65 percent approval provision.
Terms and Conditions To Assure Continued Operation in the Event of
Bankruptcy or Insolvency
Section 47134(c)(2) requires the sale or lease agreement to include
provisions ensuring that the operation of the airport will not be
interrupted by the insolvency, liquidation, or bankruptcy proceeding.
The FAA considers this to be an issue for which simple repetition of
the statutory assurance in the sale or lease agreement will not be
adequate. Some provisions that could be sufficient to ensure continued
operation are listed below; the FAA invites suggestions for other
approaches:
(1) Including in the transfer agreement an automatic reverter to
the public sponsor in the event that the airport ceases operations due
to the bankruptcy or reorganization of the private operator.
(2) In lieu of automatic reverter, including in the application a
contingency plan for sponsor takeover in defined circumstances.
(3) Recording as an encumbrance on the airport property the
obligation to operate the property as an airport.
(4) Establishing an escrow fund or bond to ensure funds are
available to pay the essential costs of operating the airport.
The FAA's objective is to implement the statutory mandate to assure
that the transferred airport continues to operate while avoiding
requirements that interfere with the feasibility of a pilot program.
The FAA specifically invites comment on whether the individual options
would be effective under U.S. bankruptcy law.
Terms and Conditions To Assure Capital Investment and Improvements by
the Airport Operator
One of the purposes of the pilot program is to use private
ownership or long term leases of airports to increase investment in
airport infrastructure above that available through the public sector.
Section 47134(c)(3) requires the transfer agreement to include
provisions to assure that the airport operator will maintain, improve
and modernize the facilities of the airport through capital investments
and will submit to the Secretary a plan for carrying out such
maintenance, improvements and modernization. The FAA proposes to
consider as acceptable components of the plan for improvement and
modernization (1) a five-year capital improvement plan (CIP), and
inclusion in the transfer agreement of a provision assuring that the
airport operator will substantially implement the five-year CIP; and
(2) an assurance of a certain minimum level of capital investment using
the private operator's funds. For an assurance of sufficient minimum
investment, the applicant could, for example, offer a five-year CIP
that exceeds or accelerates the public sponsor's most recent five-year
CIP for the airport; commit to an amount that exceeds the local match
for entitlement
[[Page 19644]]
funds; commit to apply for and use entitlement funds, if available, for
the life of the lease of the airport; or commit to use sources other
than PFCs to finance at least a share of its investment in the airport.
Terms and Conditions Relating to Safety and Security
Section 47134(c)(6) requires that the transfer agreement include
satisfactory provisions to assure that safety and security at the
airport will be maintained at the highest possible levels.
For airports that are currently subject to airport operator
certificates issued under 14 CFR Part 139, the FAA proposes to satisfy
this statutory mandate as it applies to safety by requiring that the
transfer agreement provide that the private operator shall not take
over operational control of the airport until the private operator has
received a new Part 139 certificate. The FAA proposes to take a similar
approach to airport security by requiring that a transfer agreement for
an airport governed by an airport security plan approved under 14 CFR
Part 107 provide that the private operator shall not take over
operational control of the airport until the private operator has
received approval of an airport security plan under Part 107.
For general aviation airports, including reliever airports, that
are not governed by Part 107 or Part 139, the FAA intends to rely on
the private operator's assumption of the public sponsor's outstanding
grant obligations to provide for the requisite level of safety and
security of the airport. Standard assurance 19.a requires the airport
sponsor to ``suitably operate and maintain the airport and all
facilities thereon or connected therewith,'' and further requires that
the ``airport and all facilities which are necessary to serve
aeronautical users of the airport * * * shall be operated at all times
in a safe and serviceable conditions and in accordance with the minimum
standards as may be required or prescribed by applicable Federal, state
and local agencies for maintenance and operation. It will not cause or
permit any activity or action thereon which would interfere with its
use for airport purposes.'' The FAA relies on the assurances to provide
an appropriate level of safety and security at all grant-obligated
general aviation airports, including privately-owned reliever airports
currently under grant.
Terms and Conditions Relating to Noise Mitigation
Section 47134(c)(7) requires the transfer agreement to include
satisfactory provisions to assure that adverse effects of noise from
the operation of the airport will be mitigated to the same extent as at
a public airport.
The FAA will look to proponents to describe means of assuring that
this condition can be satisfied for the particular airport at issue.
One obvious provision would be the private operator's commitment to
continue to implement the measures of an existing approved Part 150
noise compatibility program, which could be included in the transfer
agreement. (Proponents should note the provision in Section 47109(a),
as amended, setting the Federal share at 40% of project costs if
discretionary funds are used. Although FAA will evaluate applications
from a private operator according to the same priority ranking system
as for a public sponsor, the private operator should anticipate bearing
60 percent of allowable noise project costs as well as other projects
receiving discretionary funds.) The FAA solicits comment on other
possible commitments by applicants that would satisfy the intent of the
congressional requirement. For example, the sponsor could commit to
continue to exercise its land-use control powers, including the power
to condemn land for public purposes, to assure airport compatible land
use.
In proposing measures to assure the implementation of
Sec. 47134(c)(7), proponents should keep in mind that the private
operator will be subject to other assurances to permit access to the
airport on reasonable and not unjustly terms, without unreasonable
burdens on air commerce. Also, the airport under private operation will
be subject to the Airport Noise and Capacity Act of 1990 (ANCA). ANCA
prohibits the adoption of noise or access restrictions on stage 2
aircraft unless specified procedures are followed and prohibits the
adoption of noise or access restrictions on stage 3 aircraft except by
agreement with aircraft operators or upon approval by the FAA.
Terms and Conditions Relating to Environmental Mitigation
Section 47134(c)(8) requires the transfer agreement to include
satisfactory provisions to assure that any adverse effects on the
environment from operations at the airport will be mitigated to the
same extent as at a public airport. The FAA proposes to implement this
provision by requiring the airport operator to assume all mitigation
measures identified in existing records of decisions accompanying final
environmental impact statements, findings of no significant impact, and
airport layout plan approvals previously agreed to by the public
sponsor. The FAA would rely on its current practices for airport layout
plan approval, and approval of AIP grants and PFC applications to
assure that adverse effects from any new airport development are
suitably mitigated.
Terms and Conditions: Collective Bargaining
Section 47134(c)(9) requires the transfer agreement to include
satisfactory provisions to assure that the transfer does not abrogate
any collective bargaining agreement covering employees of the airport
in effect on the date of transfer. The FAA proposes to consider this
provision satisfied if the transfer agreement includes a provision by
which the parties agree not to abrogate any collective bargaining
agreement covering employees of the airport in effect on the date of
transfer. Certification from each collective bargaining representative
that the transfer agreement will not abrogate its contract would also
meet the requirement.
Unfair Competition Finding
Section 47134(e) requires the FAA to find that approval will not
result in unfair and deceptive practices or unfair methods of
competition. The FAA proposes to evaluate each proposed transaction's
potential for unfair competition individually and solicits comment on
information that would be needed to perform this evaluation.
Protection of General Aviation Interests
Section 47134(f) requires the FAA to ensure that the interests of
general aviation users of the airport are not adversely affected in
approving an application for a private transfer. The FAA intends to
review the exemption application and transfer agreement for the
applicant's commitment to this effect. The FAA solicits comments on
whether any additional measures are appropriate.
Revocation Procedures
Section 47134(i) authorizes the FAA to revoke the exemptions
granted to permit a private transfer if, after providing the airport
operator with notice and an opportunity to be heard, the FAA determines
that the transferee has knowingly violated any of the required terms
and conditions specified
[[Page 19645]]
in the section titled, Form and Content of Applications. The FAA
proposes to rely on the procedures in 14 CFR Part 16 to provide the
required notice and opportunity to be heard in the case of a revocation
proceeding. In addition, the FAA will consider other remedies, such as
obtaining orders for specific performance of the terms and conditions,
as an alternative to commencement of revocation procedures. The FAA
invites comments on the adequacy of these procedures in the event of a
violation of the terms of the exemption.
Administration of AIP Grants
Sections 47134(g)(1) authorizes otherwise eligible airports to
continue to qualify for AIP apportionments under 49 U.S.C. Sec. 47114.
In addition, a private operator may receive discretionary AIP funds,
but with a higher local share required than a public sponsor's share.
Under 49 U.S.C. Sec. 47107, the FAA must receive satisfactory written
assurances on a number of subjects before issuing a grant. This
requirement is fulfilled by the standard sponsor assurances included in
every AIP grant agreement. Section 47134 authorizes the FAA to grant
exemptions from a very limited number of the assurances mandated by
Sec. 47107.
In addition, standard assurance 5.b. requires a sponsor, before
transferring an obligated airport to include in the transfer document
and make binding on the transferee all conditions and assurances
contained in the grant agreement.
The FAA intends to apply the requirement in standard assurance 5.b.
to any transfer proposed under Sec. 47134, subject to the specific
exemptions authorized by that section. In addition, the FAA would
require an airport operator applying for new AIP grants to agree to all
standard assurances except those from which Sec. 47134 authorizes an
exemption. As with a public sponsor, approval of a project grant would
be subject to the provisions of 49 U.S.C. Sec. 47106, which requires
the FAA to make special findings on environmental impacts and local
acceptance before approving grants for certain airport improvement
projects.
The FAA employs a priority system to allocate discretionary AIP
funds. The current system does not differentiate between otherwise
equivalent projects proposed by public and private sponsors. The FAA
solicits comment on whether such a distinction is appropriate for
requests for discretionary funds submitted by participants in the pilot
program.
Administration of Passenger Facility Charges
Section 47134(g)(1) authorizes an airport operator to impose a
passenger facility charge (PFC) under 49 U.S.C. Sec. 40117. If a PFC is
being collected at an airport at the time of transfer, the FAA would
require the private operator to agree to accept all of the terms,
requirements, and limitations of the PFC statute, 14 CFR Part 158 and
all applicable records of decision approving collection and use of PFC
revenues as a condition of continuing the existing PFC program. A
private operator would need to comply with the PFC statute and Part 158
to obtain new approval to impose a new PFC or to use PFC revenue not
already approved for use in an FAA record of decision.
Notice of Public Meeting
Background
The FAA will conduct a public meeting on the proposed application
procedures and policies discussed in this notice. Comments from the
public at this meeting should be directed specifically to the agency's
implementation of the Airport Privatization Pilot Program established
in the FAA Reauthorization Act of 1996.
The closing date for comments on the proposal is June 4, 1997. In
order to give the public an additional opportunity to comment on this
notice, the FAA is planning this public meeting. Because this
additional opportunity to comment is provided, the FAA does not intend
to extend the closing date for comments.
Participation at the Public Meeting
Requests from persons who wish to present oral statements at the
public meeting on the Airport Privatization Pilot Program should be
received by the FAA no later than May 16, 1997. Such requests should be
submitted to Kevin Hehir, AAS-310, 202-267-8224 as listed in the
section titled FOR FURTHER INFORMATION CONTACT. Requests received after
May 16, 1997, will be scheduled if time is available during the
meeting; however, the name of those individuals may not appear on the
written agenda. The FAA will prepare an agenda of speakers that will be
available at the meeting. To accommodate as many speakers as possible,
the amount of time allocated to each speaker may be less than the
amount of time requested. Those persons desiring to have available
audiovisual equipment should notify the FAA when requesting to be
placed on the agenda.
Public Meeting Procedures
The following procedures are established to facilitate the public
meeting:
1. There will be no admission fee or other charge to attend or to
participate in the public meeting. The meeting will be open to all
persons who have requested in advance to present statements or who
register on the day of the meeting, subject to availability of space in
the meeting room.
2. The public meeting may adjourn earlier if all speakers have
completed their statements.
3. The FAA will try to accommodate all speakers; therefore, it may
be necessary to limit the time available for an individual or group.
4. Participants should address their comments to the panel. No
individual will be subject to cross-examination by any other
participant.
5. Sign and oral interpretation can be made available at the
meeting, as well as an assistive listening device, if requested 10
calendar days before the meeting.
6. Representatives of the FAA will conduct the public meeting.
7. The meeting will be recorded by a court reporter. A transcript
of the meeting and any material accepted by the panel during the
meeting will be included in the public docket. Any person who is
interested in purchasing a copy of the transcript should contact the
court reporter directly. This information will be available at the
meeting.
8. The FAA will review and consider all material presented by
participants at the public meeting. Position papers or material
presenting views or information related to this notice may be accepted
at the discretion of the presiding officer and subsequently placed in
the public docket. The FAA requests that persons participating in the
meeting provide 10 copies of all materials to be presented for
distribution to the panel members; other copies may be provided to the
audience at the discretion of the participant.
9. Statements made by members of the public meeting panel are
intended to facilitate discussion of the issues or to clarify issues.
FAA officials may ask questions to clarify statements made by the
public and to ensure a complete and accurate record. Comments made at
this public meeting will be considered by the FAA when deliberations
begin concerning whether to adopt any or all of the proposed rules.
10. The meeting is designed to solicit public views and more
complete information on the proposed application
[[Page 19646]]
procedures and implementation of the Airport Privatization Pilot
Program. Therefore, the meeting will be conducted in an informal and
nonadversarial manner.
Issued in Washington, DC on April 16, 1997.
David L. Bennett,
Director, Office of Airport Safety and Standards.
[FR Doc. 97-10355 Filed 4-18-97; 8:45 am]
BILLING CODE 4910-13-P
