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9 airports, by stating that airport entities may procure insurance or become a self-funded insurer.61 Other state provisions elaborate on an airport en- tityâs operational authority. For example, Vermont state law provides that some airports may be operated seasonally.62 California and New York state laws expressly authorize airport entities to regulate commercial aircraft maintenance or repairs on their premises or to buy and sell fuel, aircraft parts, and repair services.63 Alabama provides for an airport entity to operate a sewage system or other utility system in furtherance of the airport.64 Some state empowerment provisions elaborate on an airportâs role in regulating or developing surface transportation to access the airport. Airport entities generally have authority to enforce traffic rules and maintain intermodal access to some degree. Under Mississippi law some airports have the authority to control all streets within a fixed distance from the airport or construct necessary facilities in areas surrounding the airport.65 Airport entities also may have authority to operate other types of transportation facilities for passengers or cargo or both, such as railways and bus systems.66 Many states specifically empower an airport entity to pursue commercial activities in addition to its airport operations.67 For example, in various states the laws provide that an airport entity can pursue manufacturing plants, industrial plants, retail shopping areas, exhibits, and exhibitions; warehouse distribution facilities and facilities for training, offices, and other support; hotels and factories; public parks and restaurants; parking lots, motels, and gas stations; space for recreation, trade, sporting events, and public meetings; access toll roads; the selling of water services; the operation of water and sewage utility systems; edu- cational institutions; and residential structures. Some laws also provide for the ability to maintain a foreign trade zone at or near the airport or pursue leases for 61 See KY. REV. STAT. ANN. Â§ 183.120 (2010). 62 See VT. STAT. ANN. tit. 5, Â§ 808 (2009â2010 Adj. Sess.) (seasonal operations). 63 See CAL. GOVâT CODE Â§ 50474.5 (2010 Reg. Sess., 2009â 2010 1stâ8th Ex. Sess.) (repairs); N.Y. GEN. MUN. LAW Â§ 352 (McKinney, L.2010) (parts and services). 64 For example, see ALA. CODE Â§ 4-3-11 (through 2011 Reg. Sess.) (sewage and utility systems). 65 See MINN. STAT. ANN. Â§ 360.038 (through 2010 2d Sp. Sess.) (roadways). 66 For example, see MISS. CODE ANN. Â§ 61-3-15 (through 2010 Reg. & 1st & 2d Ex. Sess.) (development of intermodal facilities for passengers and cargo). 67 Forty-four out of 46 airports responding to the survey at App. B reported that they have the legal authority to award concessions for business activities at the airport that may com- pete with other businesses in the vicinity. State authorizing provisions for these activities are contained in the code sections set forth at App. A: State Codes (noting citations for state em- powerment provisions). agriculture or oil and gas development.68 States also may prohibit some of these commercial activities, and private providers can challenge whether the airport entity has authority to conduct activities in competition with them.69 All of these elementsâthe airportâs public purpose and other governmental attributes, the scope of its ju- risdiction, traditional legislative drafting styles, and specific airport-related policiesâcreate the grant of state powers that an airport entity may exercise. That grant is essential; while courts may interpret it broadly, statutory authority must still support an airport en- tityâs actions or they will be considered void. Govern- ment entities have no power to act if a power has not been granted or if their actions contravene state law requirements. Thus the airport entity must conduct its operations and comply with federal obligations based on the scope of its empowering legislation.70 II. ESTABLISHING STATE POLICIES FOR AIRPORTS In many areas that relate to interstate transporta- tion, federal legislation now preempts state regulation over airports. Yet that federal policy does not supplant a stateâs ability to establish a variety of local policies and priorities for its airports. State laws assert these interests through a state aeronautics agency that ad- ministers aviation policy in varying degrees. The agencyâs roles can include an oversight function for air- ports, investigation, licensing, authority to direct the flow of federal funds to local airports, and administer- ing local funding mechanisms to complement federal support. This state authority can preempt the powers of local airport entities. States may assert aviation policies through other laws as well. Most commonly, states ad- vance such interests through tax measures addressing airports and businesses that benefit from airports. 68 For example, see MASS. GEN. LAWS ANN. ch. 91 App., Â§ 1- 3 (through 2010 Ann. Sess., ch. 392) (foreign trade zone); KAN. STAT. ANN. Â§ 27-320 (through 2010 Reg. Sess.) (oil and gas). 69 For example, see Brown Flying School, Inc. v. Terre Haute Intâl Airport Auth., 911 N.E.2d 735 (Ind. App. Aug. 21, 2009) (flying schoolâs complaint that airport entity lacked statutory authority to operate competing flight school dis- missed on procedural grounds). See also Â§ 3.B, infra (regarding antitrust issues). 70 For example, see Airport Auth. of City of St. Marys v. City of St. Marys, 297 Ga. App. 645, 678 S.E.2d 103 (2009) (cityâs statutory authority allowed it to exclude airport authority from discussions concerning relocation of airport, and as such city did not violate any law or contract). See also Â§ 3, infra, regard- ing the effect of empowerment provisions on an airport entityâs liabilities and immunities; Comair, Inc. v. Lexington-Fayette Urban County Airport Corp., 295 S.W.3d 91 (Ky. 2009) (exam- ining in part powers conveyed by airport boardâs state author- izing statutes to determine whether board entitled to sovereign immunity to protect against tort liability in crash of commuter jet).
10 A. State Aeronautics Agencies Most states have created a state agency or depart- ment that, to varying degrees, oversees aeronautics and administers aviation policies statewide. Similar to em- powering provisions for airport entities, empowering provisions for state aeronautics agencies also reflect common drafting influences. In particular, many of these statutes are patterned on a uniform law produced by the National Conference, the Uniform Aeronautical Regulatory Act of 1935.71 This Act was adopted in three states, but its influence can be seen in the laws of many states.72 The Uniform Act establishes the basic role of an aeronautics agency. It first defines many aeronautics terms and offers guidance for forming a state aeronau- tics function, such as by providing methods for appoint- ing a board and specifying its powers.73 It then provides that an aeronautics agency has authority to supervise aeronautics generally within the state, which includes the location and establishment of airports and other air navigation facilities. The Uniform Act allows an aero- nautics agency to adopt rules and regulations, establish minimum aeronautical standards consistent with fed- eral law, enforce its own requirements, and in general develop and promote aeronautics.74 The Uniform Act also gives an aeronautics agency other specific powers and duties. The agency can con- duct investigations and hold hearings concerning avia- tion using procedures as stated in the Uniform Act. Aeronautics employees and all municipal law enforce- ment officers have the authority to enforce the Act, in- cluding by injunction. They are authorized to conduct inspections of airport facilities at reasonable hours. A person who violates the Act, or any rules, regulations, or orders promulgated under it, is guilty of a misde- meanor and subject to fines and imprisonment. As with other uniform laws, the Act is to be interpreted in a manner consistent with the other states that adopt it.75 The aeronautics laws of many states reflect the broad powers and specific responsibilities established in the Uniform Act.76 Typically, a state aeronautics agency can exercise regulatory powers and supervise state aeronautics activities (whether or not it can own and operate airports) by issuing rules, regulations, mini- mum standards, and orders. Aeronautics agencies gen- erally have the ability to work with federal and local government to foster air commerce and oversee a statewide system of airports (in coordination with the federal system). Aeronautics agencies may draft legisla- 71 Reproduced in App. C with permission of the National Conference of Commissioners of Uniform Laws. 72 See App. A: State Codes (noting states with aeronautics act provisions). 73 See Unif. Aeronautical Regulatory Act Â§ 1. 74 See id. Â§Â§ 1 and 5. 75 See id. Â§ 16. 76 See App. A: State Codes (noting state aeronautics act provisions and uniform law influences). tion regarding aeronautics and participate in aeronau- tics litigation and agency hearings. State aeronautics agencies often may conduct inves- tigations and hearings on aeronautics issues and have authority to inspect airport facilities. They are empow- ered to enforce state aeronautics requirements by police power (through designated employees) or by obtaining an injunction, and violations of a stateâs aeronautics act are normally a misdemeanor. Often these agencies may publish charts and airport directories, regulate safety, conduct studies, issue reports, enter contracts, employ personnel and consultants, purchase materials, and impose charges. These agencies are usually funded through appropriations, grants, gifts, and fees. Some states also give their aeronautics agencies authority to condemn or acquire lands and airport protection privi- leges, or to assist municipalities with those measures and with local zoning requirements. State statutes have been known to include other spe- cific powers within the role of an aeronautics agency as well. For example, some statutes provide aeronautics agencies with specific authority to help develop air ser- vice through the use of air marketing grants, feasibility studies, and statewide marketing programs; authorize them to create partnerships with military and aero- space industries; or empower them to provide financial assistance to support industrial and other compatible development at airports.77 States may also give their aeronautics agencies a role in regulating specific activi- ties, such as airport emergency plans, civil defense ac- tivities, spaceports, airport snow removal, or input on security plans at airports. These statewide powers over aeronautics can sub- stantially impact an airport entity. They can have a preemptive effect on actions by local government simi- lar to the way that federal aviation regulations can pre- empt both state and local action. Federal regulation is preemptive when federal statutes expressly so provide, or when preemption can be implied because state and local laws would either conflict with the federal regula- tion or the federal regulation occupies the field to the point that it leaves no room for the exercise of concur- rent powers.78 Statewide aviation powers create a role for the state and normally local legislation cannot con- tradict the terms and policy of state legislation. Local actions are preempted to the extent that they conflict with broad state powers.79 77 For example, see MINN. STAT. ANN. Â§ 360.0151 (through 2010 2d Sp. Sess.) (marketing programs); FLA. STAT. ANN. Â§ 332.006 (2011 1st Reg. Sess.) (industrial uses). 78 See Cipollone v. Liggett Group, Inc., 505 U.S. 504, 112 S. Ct. 2608, 120 L. Ed. 2d 407 (1992). 79 See Garden State Farms, Inc. v. Bay, 146 N.J. Super. 438, 370 A.2d 37, 39 (1977) (â[a] municipality may not contradict a policy the Legislature establishesâ); Township of Readington v. Solberg Aviation Co., 409 N.J. Super. 282, 976 A.2d 1100 (2009) (state aviation act could have a preemptive effect on conflicting local legislation); City of Burbank v. Burbank- Glendale-Pasadena Airport Auth., 113 Cal. App. 4th 465, 6 Cal. Rptr. 3d 367 (2003) (determining that local restrictions
11 State aeronautics agencies thus provide the state with a means of asserting state policy and oversight in areas that involve local concerns, although in practice, an agencyâs actual operations may vary.80 Aeronautics agencies may be most active in asserting state policy under their roles related to licensing and funding air- ports. B. Licensing Airports State licensing statutes often reflect the influence of the previously mentioned Uniform Aeronautical Regu- latory Act of 1935.81 Under the Uniform Act, an aero- nautics agency may license airports82 and may prohibit landings at locations other than at an airport.83 The Act also imposes a licensing process under which airport entities must submit a license application to the agency.84 The aeronautics agency may reject an airport entityâs license application, or it may issue orders re- quiring or prohibiting certain things to be done.85 The agency also may order that an airport be closed until its requirements are met. The Uniform Act provides that an aeronautics agency must state the reasons for its licensing actions and disclose any acts that an airport entity must take in order to obtain a license approval (or the modification of an agency order). It also includes an appeal process.86 States typically include a licensing role within their state aeronautics agency that reflects the Uniform Actâs basic structure.87 Normally a state aeronautics agency must initially approve the site for an airport by issuing a certificate of approval. State statutes may include criteria to govern the agencyâs evaluation of a site, such as the degree to which it conforms to a statewide plan, location, master plan considerations, future expansion ability, and the nature of the siteâs terrain, noise issues, and proximity to other airports.88 imposed on airport by voter initiative not effective because state aeronautics legislation determined to relate to a matter of statewide concern, thus precluding initiative measures on the subject); Somerset Air Service v. Township of Bedminster, 2007 WL 1774058 (N.J. Super. A.D. June 21, 2007) (state statute makes local zoning regulations inoperative so far as inconsis- tent with state act). 80 See App. A: State Codes (noting state aeronautics act provisions). Two of the respondents to the survey at App. B: Questionnaire Responses noted that their state aeronautics acts are currently under revision. 81 Reproduced in App. C with permission of the National Conference of Commissioners of Uniform Laws. 82 Uniform Aeronautical Regulatory Act of 1935 Â§ 9. 83 Id. 84 Id. 85 Id. Â§ 10. 86 Id. Â§Â§ 11â13. 87 The Uniform Aeronautical Regulatory Act contained these powers and influenced the laws in many states. See App. A: State Codes (noting states with aeronautics act provisions). 88 For example, see IOWA CODE ANN. Â§ 328.19 (through 2011 Reg. Sess., July 5, 2001). State laws then often empower an aeronautics agency to issue an operating license and take other li- censing actions, such as renewals and revocations. The aeronautics agency may be required to conduct a public hearing when taking these licensing actions. State laws also may specify criteria for revocation actions, such as failure to comply with state regulations, site abandon- ment, or a determination of unsafe conditions. Consis- tent with the Uniform Act, in most states if an aeronau- tics agency determines to deny an application or issue a revocation, it must state its reasons for taking the ac- tion and disclose any requirements to be met to reverse the action. Some states also exempt specific airports from licensing requirements, such as private airports, federal airports, public airports holding federal certifi- cates, or agricultural airports. States may express a variety of other policies in their licensing provisions as well. For example, West Virginia state law expands the role of its aeronautics agency in connection with making rules for an airportâs design, location, construction, and operation.89 States may em- power their aeronautics agencies to close an airport runway or taxiway, or allow landing areas on beaches, or oversee a specific airport development such as the OâHare Modernization Program.90 State agencies may also retain authority to license heliports or establish emergency landing fields.91 As previously noted, these licensing powers prevail over any conflicting actions by local government.92 The state thus implements local aviation policy through its various licensing actions.93 C. Channeling Federal Funds Federal grants constitute an important source of funding for airport entities. While the federal govern- ment provides the funds, however, states can promote local policies by empowering a state aeronautics agency (or other state agency) to direct how local airport enti- 89 W. VA. CODE ANN. Â§ 29-2A-3 (through 2010 2d Ex. Sess.). 90 See description of OâHare Modernization Program at http://www.cityofchicago.org/city/en/depts/doa/provdrs/omp. html. For another example, see CAL. PUB. UTIL. CODE Â§ 21605 (through 2010 Reg. Sess., 2009â2010 1stâ8th Ex. Sess.) (run- ways and taxiways). 91 For example, see CONN. GEN. STAT. Â§ 13b-46 (through Jan. 1, 2011, Gen. St., Rev.) (heliports and other functions). 92 See Â§ 2.A, infra; See also Garden State Farms, Inc. v. Mayor Louis Bay II, 146 N.J. Super., 438, 370 A.2d 37 (1977). 93 Federal law recognizes a stateâs licensing powers over airport locations. For example, federal grant assurance obliga- tions require that local airport plans be âreasonably consistentâ with the plans of public agencies authorized by the state where an airport project is located. See Grant Assurance No. 6, http://www.faa.gov/airports/aip;grant_assurances/media/ airport_sponsor_assurance.pdf. However, typically the federal government has not permitted local governments that are not airport proprietors to exercise control over an airportâs aero- nautical activities through licensing measures; instead such actions may be considered preempted by federal law. See Tweed-New Haven Airport Auth. v. Town of East Haven, 582 F. Supp. 2d 261 (D. Conn. 2008).
12 ties may apply for and receive federal grants. In states taking this approach, these acts, known as âchanneling acts,â often require that airport entities first obtain state approval to apply for the grant and then receive the funding through the state. State channeling laws typically give an aeronautics agency authority to approve what projects may be sub- mitted for federal grant funding as well as authority to approve the grant application itself. Normally they em- power both the state and the agency to enter the federal agreements required to obtain the funding. The airport entity also enters an agreement with the aeronautics agency, and the state then acts as the airport entityâs agent to seek and disburse the funds. States with chan- neling acts may also empower the aeronautics agency to enter construction contracts on behalf of an airport en- tity and to supervise the work performed at the airport. The aeronautics agency normally must conduct these activities in compliance with state contracting laws ex- cept as otherwise prescribed by federal authorities. States that adopt channeling acts may also make an exception for specific airport entities within the state, allowing them to apply for federal grants directly, such as for specified commercial service airports, regional airport authorities, airports certificated under 14 Code of Federal Regulations (C.F.R.) Part 139,94 or reliever airports.95 In these states, if an airport entity is empow- ered to pursue federal funding as the principal, it usu- ally also has the option to appoint the state aeronautics agency as its agent. When a state acts as an airport entityâs agent to receive federal funds, the state might also be empowered to assume liabilities for the airport entity to some extent, such as by entering an indemnity agreement on behalf of the airport entity concerning the title to affected land.96 States that have adopted chan- neling acts include some or all of these powers. Actual practices vary, but to the extent the state exercises this power, its aeronautics agency can act as a statewide administrator of federal funding to help implement state planning and policy objectives. D. State Assistance States also empower an aeronautics agency (or other state agency) to provide state resources to local airport entities. The revenues to fund these programs may come from state appropriations or from other revenues that the state receives, such as revenues from aviation fuel taxes and taxes on flight property; revenues from the operation of state facilities or services, the sale of seized or abandoned aircraft, and from state registra- tion and licensing programs; the payment of penalties and sales of surplus property; the issuance of bonds; and gifts and donations. In addition to providing fund- ing to local airports, state laws also authorize state 94 http://www.faa.gov/airports/airport_safety/part139_cert/. 95 For example, see TEX. TRANSP. CODE ANN. Â§ 21.114 (Vernon, through 2011 Reg. Sess., ch. 41) (reliever airports). 96 For example, see S.D. CODIFIED LAWS Â§ 50-7-19 (through 2010 Reg. Sess.). aeronautics agencies to provide engineering and other technical assistance (with or without charge).97 Under a state grant program, an aeronautics agency may offer applicants independent state grants or âmatching fundsâ in support of federal grant require- ments. When determining whether to make these funds available to an airport entity, state laws require state agencies to consider specific eligibility criteria. For ex- ample, the law may limit the amount of funding avail- able for a single project or for a given type of airport based on its size. States may indicate available uses for matching funds, or they may mandate the useful life of an airport receiving funding. States may also expressly allocate portions of this state funding to the airport where the revenues originated.98 State grant programs generally focus on funding for airport development, but they also may fund other air- port activities. For example, in various states, the law makes funding available for airport access projects, noise mitigation projects, programs for aviation safety and education, and airport planning projects. State law also may make local grants available in support of an airport entityâs air service and marketing activities, such as grants for air carrier recruitment programs, marketing activities, and air service subsidy programs for small communities.99 Similar to federal grant programs, state grant pro- grams may impose conditions on funding recipients. For example, in Illinois, state grant covenants obligate air- port entities to remain open for public use for 20 years.100 In Wyoming, the law allows the aeronautics agency to enforce proper maintenance at an airport receiving a state grant.101 In Tennessee, the state aero- nautics agency may supervise a project funded by a local grant, or construction may be subject to the stateâs technical design coordination and approval.102 Local grants may be conditioned on the airport entity acquir- ing title to property, establishing zoning authority to protect the airport, or charging landing fees on an equal basis to all airport users. Washington state law requires 97 For example, see OR. REV. STAT. ANN. Â§ 836.010 (through 2010 Sp. Sess.). 98 For examples, see UTAH CODE ANN. Â§ 72-10-202 (through 2010 Gen. Sess.) (size); FLA. STAT. ANN. Â§ 332.006 (through 2010 2d Reg. Sess., ch. 274 & 2010 Sp. A. Sess., ch. 283) (uses stated); N.H. REV. STAT. ANN. Â§ 422:36 (through 2010 Reg. Sess., ch. 381 & 2010 Sp. Sess., ch. 1) (where revenues origi- nate). 99 For example, see 20 ILL. COMP. STAT. ANN. 3958/15 and 3958/25 (through 2010 Reg. Sess., P.A. 96-1496) (recruitment); ME. REV. STAT. ANN. tit. 6, Â§ 19 (through 2009 2d Reg. Sess.) (air service). 100 See 620 ILL. COMP. STAT. ANN. 5/34 (through 2010 Reg. Sess., P.A. 96-1496). 101 See WYO. STAT. ANN. Â§ 10-3-201 (through 2010 Bud. Sess.). 102 See TENN. CODE ANN. Â§ 42-2-203 (through 2010 1st Ex. Sess. & 2010 Reg. Sess.).
13 the repayment of state assistance as a penalty for some violations of state grant covenants.103 State assistance programs may also include a revolv- ing loan program giving airport entities access to a spe- cific fund. Under these programs, loans may be subject to stated durations, interest rates, and other require- ments, and if airport entities do not repay loans as re- quired, the state may be empowered to withhold those funds from other amounts that the state may be obli- gated to pay to the airport entity. As with state grant programs, state aeronautics agencies may impose eligi- bility requirements on revolving loan programs and limit the entities and projects on which funds may be expended. Other application requirements may be specified as well.104 E. Other State-Authorized Assistance for Airports Laws in every state support airport development and operations by authorizing airport entities to obtain funding from a variety of other sources. Some of those sources are not expressly reserved for aviation pur- poses. For example, state laws generally authorize mu- nicipalities to assist airport entities by gift, lease, loan, appropriation, or by issuing bonds, whether or not the municipalities own an airport. The law may authorize municipalities to enter cost-sharing agreements with airport entities as well.105 State laws also typically pro- vide that when municipalities participate in an airport authority, they may make contributions to the author- ity (or are obligated to levy taxes on its behalf). Airport entities may also have access to funding through development or finance authorities created for purposes such as industrial development, economic de- velopment, or transportation. Funding through these agencies may rely primarily on the issuance of bonds.106 The state also may provide airport entities with access to funds created for specific reasons, such as funds maintained to support the fishing industry, a âcounter- cyclicalâ stabilization fund, or specific disaster relief funds. In some instances, states also may provide for the use of public-private partnerships to carry out air- port projects.107 Among other examples, states may re- quire certain airport entities to assist other airports by distributions of unneeded equipment. State law may 103For example, see KY. REV. STAT. ANN. Â§ 183.764; MINN. STAT. ANN. Â§ 360.021 (zoning requirements); WASH. REV. CODE ANN. Â§ 47.68.090 (through 2011, May 31, 2011) (repayment). 104 For example, see IND. CODE ANN. Â§Â§ 8-21-11-8 (through 2010 2d Reg. Sess.). 105 For example, see WASH. REV. CODE ANN. Â§ 14.08.310 (through 2011, ch. 1 & 2). 106 For example, see ARIZ. REV. STAT. ANN. Â§Â§ 35-701, 41- 4501 (through Jan. 11, 2011, 1st Reg. Sess.). 107 For example, see N.J. STAT. ANN. Â§ 34:1B-7.13 (through L.2011 c. 140 and J.R. No. 8) (providing for certain public- private partnerships). allow an adjoining state to provide funding for airport development or operations.108 State laws also authorize airport entities to generate their own revenues or implement other funding meas- ures.109 Airport entities can collect rents and charges and use their own revenues to support airport develop- ment and operations. The state may also give some air- port entities authority to levy taxes and spend tax pro- ceeds for airport purposes. These airport entities may be municipalities with general government responsibili- ties, including taxing authority, or state laws may pro- vide that an airport entity is a special district or other entity that has an independent authority to levy taxes and issue bonds.110 State laws typically authorize airport entities to ob- tain financing by issuing bonds as well. Government bonds are subject to detailed legal requirements, but in general, airport entities are authorized to incur debt, issue obligations, and give security for those obliga- tions. Airport entities generally issue revenue bonds (secured by airport revenues) or general obligation bonds (secured by taxes), but state laws often expressly allow them to participate in other types of debt obliga- tions as well, such as refunding bonds, notes, warrants, tax or grant anticipation notes, revenue certificates, interest rate swaps, hedges, credit enhancement facili- ties, loan contracts, and other obligations. California state law also provides that airport entities have access to private sector investment capital.111 State laws can permit a variety of options for secur- ing bond obligations. Typically obligations may be se- cured by airport revenues, and in connection with that commitment states may also provide that the airport entity cannot change its fixed contract revenues while the commitment is in effect.112 General obligation bonds issued for the benefit of an airport are secured by a general tax levy, and they typically rely on the credit of a larger municipality. A state also may allow bonds to be secured by a mortgage on airport facilities, and in such a case, the bondholders may have a right to fore- close in the event of a default and petition the court to 108 For example, see ARIZ. REV. STAT. ANN. Â§ 28-8422 (through Jan. 11, 2011, 1st Reg. Sess.) (adjoining state); COLO. REV. STAT. ANN. Â§ 43-10-110.7 (through 2011 1st Reg. Sess.) (city and county of Denver to convey unneeded equipment to aeronautics division for redistribution). 109 Passenger facility charges are a significant source of revenue to some airports, but as a federal program they are not discussed in this study. Customer facility charges used to fund car rental facilities are discussed in Â§ 5, infra. 110 For example, see GA. CODE ANN. Â§ 48-8-111 (through 2010 Reg. Sess.) (raising revenues through sales and use taxes); W. VA. CODE ANN. Â§ 7-11B-3 (through 2010 2d Ex. Sess.) (airport participation in state tax increment financing act); 70 ILL. COMP. STAT. ANN. 5/13 (through 2010 Reg. Sess., P.A. 96-1496) (providing taxing authority to airport). 111 CAL. GOVâT CODE Â§ 5956.2 (through 2010 Reg. Sess., 2009â2010 1stâ8th Ex. Sess.). 112 For example, see TENN. CODE ANN. Â§ 42-5-115 (through 2010 1st Ex. Sess. & 2010 Reg. Sess.).
14 appoint a receiver to operate the airport. Conversely, a state may expressly prohibit an airport entity from mortgaging airport property in connection with bonds.113 State laws may impose a number of requirements on bonds issued for an airport. These bonds are typically tax-free under state law, but some states impose spe- cific taxes such as transfer or franchise taxes.114 States typically place limitations on how much debt a govern- ment entity may incur, and airport bond issuances may or may not be subject to limitations on authorized in- debtedness.115 State laws may impose covenants on air- port entities concerning the issuance of bonds, such as covenants requiring them to procure insurance or main- tain adequate rentals. Many other common require- ments apply to issuing government bonds. Airport- specific laws regarding issuing bonds normally are con- strued consistent with a stateâs other applicable laws.116 State laws may expressly authorize airport entities to use bond issuances for a specific purpose. For exam- ple, states may permit airport entities to issue special facility bonds, which finance a tenant facility based on entering a long-term lease. The law may impose addi- tional requirements. Under Minnesota state law, when these bonds are issued for the benefit of an airline, the airline must maintain its headquarters in that location and take other steps to expand its facilities and ser- vices, prevent job loss, promote economic activity, and ensure growth and diversification of the tax base.117 Special facility bonds may be issued for a variety of revenue-producing facilities at airports, but their use may be less common under recent case law.118 In some instances, state laws may allow an airport division to use resources that are generated by the other operations of its parent entity. For example, Kan- 113 See N.M. STAT. ANN. Â§ 3-39-13 (through 2010 2d Reg. Sess. & 2d Sp. Sess.) (permitting foreclosure); IND. CODE ANN. Â§ 8-21-9-26 (through 2011 Pub. Law, June 28, 2011) (prohibit- ing mortgage). 114 For example, see W. VA. CODE ANN. Â§ 13-2D-12 (through 2011 2d Extra Sess.) (airport development bond revenues ex- empt from taxation except transfer and other specified taxes). 115 For example, see OHIO REV. CODE ANN. Â§ 133.05 (through 2010, filed with Sec. of State Jan. 26, 2011). 116 For example, see S.D. CODIFIED LAWS Â§ 50-8-12 (through 2010 Reg. Sess.); S.C. CODE ANN. Â§ 55-9-20 (2010 Reg. Sess.). 117 See MINN. STAT. ANN. Â§ 473.6021 (through 2010 2d Sp. Sess.). 118 See Wilmington Trust Co. v. County of Allegheny, 2005 U.S. Dist. LEXIS 19618 (W.D. Penn. Sept. 9, 2005) (holding airport entity terminated lease subject to special facility fi- nancing based on provisions allowing termination in the event of bankruptcy filing, and determining that while a subsequent lease was entered without providing for payment to bondhold- ers, plaintiff did not have a Section 1983 action for deprivation of a property interest; related state claims were dismissed for lack of jurisdiction); Wilmington Trust Co. v. County of Alle- gheny, 640 F. Supp. 2d 643 (W.D. Pa. 2009) (denying bond- holder claims based on trespass, contract, and duty to bond- holders in connection with special facility financing). sas state law authorizes a municipality to pay for air- port operations from the revenues of a public utility. The municipality may pay for airport expenses from the earnings of its water and electric plants when revenues are not needed for those operations, and the municipal- ity may adjust water and electric rates to pay for air- port costs and bonds.119 Other financing alternatives may be available to airports, and in general, state laws tend to provide a broad range of alternatives to support airport development and operations. F. Tax Measures at Airports States also express their aviation policies through tax measures. When addressing tax issues for the air- port entity itself, states generally recognize the gov- ernmental nature of the entity and promote airport ac- tivities by exempting airport property and income from state and local taxes. Generally this is true even when an airport is owned by an adjoining state. If an airport entity owns property that it does not use for the pur- poses of a public airport, however, such as property used for residential, commercial, or industrial purposes, that portion of the property may be subject to taxa- tion.120 State laws also may make an airport entity sub- ject to payments in lieu of taxes, such as payments in connection with school districts.121 The state may implement a variety of other airport- specific policies through the tax law that it applies to airport entities. For example, in Wyoming, state airport property may only be tax exempt when charges for the use of airport facilities do not exceed the cost of opera- tions and maintenance.122 Privately owned airports may be subject to taxation, or state laws may permit tax exemptions based on a local vote, or for specific areas such as runways and taxiways, or when a privately owned, public-use airport is available for use without charge.123 State laws typically exempt an airport en- tityâs purchases from sales and use taxes.124 In general, state tax policies normally remove tax burdens from public airports.125 119 See KAN. STAT. ANN. Â§ 3-127 (through 2010 Reg. Sess.). 120 For example, see NEV. REV. STAT. ANN. Â§ 361.157 (through 2009 Reg. Sess. & 2010 Sp. Sess.). 121 For example, see N.H. REV. STAT. ANN. Â§ 423:9 (through 2010 Reg. Sess., ch. 381 & 2010 Sp. Sess., ch.1). 122 See WYO. STAT. ANN. Â§ 39-11-105 (through 2010 Bud. Sess.). 123 For example, see TENN. CODE ANN. Â§ 67-5-219 (through 2011 1st Reg. Sess.) (exempting runway and apron areas of private public-use airports). 124 For example, see N.D. CENTURY CODE Â§ 57-43.1-08 (through 2009 Reg. Sess.) (fuel used in construction subject to tax refund). 125 This policy also is consistent with federal requirements that prohibit an airport entity from diverting airport revenues to nonairport uses, and the federal government gives closer scrutiny to an airport entityâs transfers to other government entities. See 49 U.S.C.A. Â§Â§ 47107(l) and 47113; Policy and Procedures Concerning the Use of Airport Revenue, 64 Fed. Reg. 7696 (Feb. 16, 1999).
15 State tax policies regarding airports can also affect a variety of private interests that benefit from airport operations. These private interests may be subject to state or local taxes or charges, or they may benefit from tax immunities or exemptions. For example, states may impose a tax on airport tenantsâ real and personal prop- erty and on the privilege of using public airport prop- erty under a lease agreement.126 They may expressly tax some commercial functions at an airport, such as tie down spaces or leasehold improvements, and they also may require airport tenants to make payments in lieu of taxes (especially when development is not aviation- related).127 Some states, however, exempt tenant leased property from privilege taxes if the property is being used for public purposes, such as with concessionaires providing services to the public or fixed base operators providing aeronautical services.128 States also generally impose personal property taxes on privately owned aviation equipment, such as by im- posing airline flight property taxes, a utility tax or ex- cise tax on aircraft, or taxes on aircraft that are based in the state.129 Various states may create specific ex- emptions as well, such as for equipment used in making transient use of the airspace, government aircraft, col- lector and recreational aircraft, agricultural aircraft, hot air balloons, and other specifically identified opera- tions. State laws also may impose taxes on other private activities at airports, such as providing parking facili- ties at or near the airport, use of the airport by ground transportation vehicles, and car rental charges at air- 126 For example, see MINN. STAT. ANN. Â§ 360.521 (through 2010 2d Sp. Sess.) (tax on airline aircraft). 127 For example, see CONN. GEN. STAT. Â§ 12-19a (through 2011 Jan. Reg. Sess., June Sp. Sess. and Oct. Sp. Sess.) (requir- ing certain payments in lieu of taxes). 128 For example, see UTAH CODE ANN. Â§ 59-4-101 (through 2010 Gen. Sess.) (concessionaire exemption); MINN. STAT. ANN. Â§ 272.01 (through 2010 2d Sp. Sess.) (FBO exemption). See, e.g., Lehigh-Northampton Airport Auth. v. Lehigh County Bd. of Assessment, 585 Pa. 657, 889 A.2d 1168 (2005) (hangar space used by commercial service airlines was within airport authorityâs governmental purpose and immune from property taxation; immunity from property taxation was assumed unless authority acted outside of its authorized governmental purposes); City of York v. York County Bd. of Equalization, 266 Neb. 297, 664 N.W.2d 445 (2003) (city land leased as buffer zone for airport and incidentally used for agriculture was ex- empt from taxation); In re Board of Property Assessment, 797 A.2d 414 (Pa. Cmwlth. 2002) (subleased facilities selling candy and alcoholic beverages reasonably necessary for efficient op- eration of airport and thus exempt from taxation); City of Little Rock v. McIntosh, 319 Ark. 423, 892 S.W.2d 462 (1995) (leases for car rental facilities and aircraft service centers at airports did not exclusively serve public purpose and thus property subject to ad valorem taxes; federal law did not dictate the analysis in state tax cases); Charleston County Aviation Auth. v. Wasson, 277 S.C. 480, 289 S.E.2d 416 (S.C. 1982) (lease of property to airlines, car rentals, ground transportation, gift shop, etc., fell within exemption from ad valorem taxes). 129 For example, see UTAH CODE ANN. Â§Â§ 59-2-404 and 72- 10-116 (through 2010 Gen. Sess.). ports.130 Local taxes generally apply as well, and in some cases, state law allows both the airport entity and the jurisdiction where an airport is located to impose taxes such as occupation and business activity taxes.131 Some states impose a tax on aviation fuels, including jet fuel and aviation gasoline.132 Many also create avia- tion fuel tax exemptions or rebates that reflect local aviation policies. For example, Michigan state law makes airlines eligible to receive refunds when they operate scheduled intrastate service, and Kentucky law permits refunds for all aircraft transporting persons or property.133 In Utah, refunds are structured based on what airports an airline uses.134 State policies also may exempt specific operations from these taxes, such as charitable flights, air ambulance services for low- income patients, or agricultural flying. States also may use their tax policies to promote air- port development or specific kinds of aviation activity. At least one state court found such statutes to be consti- tutionally permissible due to existing federal aviation legislation.135 For example, among various states, local laws may create tax benefits to promote airline devel- opment at a hub facility (or other capital investments); to promote purchases of aircraft parts and material by a hub or commuter airline; for specific airline invest- 130 For example, see N.D. CENTURY CODE Â§ 40-57.3-01.2 (through 2009 Reg. Sess.). 131 For example, see TENN. CODE ANN. Â§ 42-4-116 (through 2010 1st Ex. Sess. & 2010 Reg. Sess.). While federal law does not preempt local taxation of these interests, where that taxa- tion conflicts with federal policy, preemption may be found to prohibit a local tax. See Township of Tinicum v. U.S. Depât of Transp., 582 F.3d 482 (3d Cir. 2009) (a nonproprietor local government could not assert taxing authority over the landing of aircraft, even where landings occurred on the nonproprie- torâs land). 132 In the survey at App. B: Questionnaire Responses, 9 out of 46 respondents reported using tax revenues at their airports and referred to fuel tax revenues that were used to fund state grant programs. 133 See MICH. COMP. LAWS ANN. Â§ 259.203 (through P.A. 2010, No. 266, Reg. Sess.) (intrastate service); KY. REV. STAT. ANN. Â§ 138.341 (through 2010) (transporting persons or prop- erty). 134 See UTAH CODE ANN. Â§Â§ 59-13-401 and 59-13-402 (through 2010 Gen. Sess.). 135 See WIS. STAT. ANN. Â§ 70.11 (through 2009 Act 406, pub. June 2, 2010) (incentives). See also Nw. Airlines, Inc. v. Wis. Depât of Revenue, 293 Wis. 2d 202, 717 N.W.2d 280 (2006) (finding that because 49 U.S.C.A. 40116 specifically authorizes states to impose ad valorem taxes on airline property, it pre- cludes a dormant Commerce Clause challenge to a state tax exemption for airline hub property due to this clear and unam- biguous authorization to tax transportation property (provided tax rates or ratios did not exceed those of comparison group); also finding a rational basis for tax classification under equal protection challenge). Varying circumstances, however, may alter the legal analysis. See West Lynn Creamery, Inc. v. Jonathan Healy, 512 U.S. 186; 114 S. Ct. 2205; 129 L. Ed. 2d 157 (1994) (invalidating state tax assessed on milk produced out of state and distributed to in-state dairy farmers).