Generating Revenue from Commercial Development On or Adjacent to Airports (2017)

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13 C h a p t e r 2 Fundamentals 2.1 Overview This chapter orients the guidebook user to the language, tools, and concepts used in ACRP Research Report 176. It serves as a primer, introducing major elements of aviation planning, aviation funding, and land development in just a few pages of text. The chapter then introduces the five tier concept— a definition of five relationships between property ownership and airport access that directly impacts the level of FAA regulatory control over property development. The discussion uses a graphic depiction of parcel locations in relation to the airport to support the definition of a unique vocabulary that is essential to the later toolkit discussions.

14 Generating revenue from Commercial Development On or adjacent to airports 2.2 Aviation Planning KNOW On-airport development planning typically consists of airport master plans and airport layout plans (ALPs) and, as applicable, the analyses and studies required by regulatory agencies prior to funding for projects. Airport master plans and ALP drawing sets provide specific information about an individual airport’s plans for future development and are a valuable source of information when considering opportunities for revenue generation from adjacent airport development. Airport development using federal funds at federally obligated airports must be done in accordance with an ALP approved by both the sponsor and FAA. Proposed development must also be shown on an approved ALP to be eligible for Airport Improvement Program (AIP) funding. This connection to regulatory oversight and federal funding provides an assurance that development, when it happens, will occur as planned. Some airports that are not federally obligated will also have an ALP, either because of a state initiative or in anticipation of a potential future need for federal funding. HAVE The Self-Assessment Toolkit in Chapter 4 includes a section to explore an individual airport’s master plan and ALP. This section provides a basic understanding of the documents that make up the Airport Master Plan and ALP drawing set, along with their roles. AIRPORT MASTER PLAN—An Airport Master Plan is a long-range planning tool that guides the growth and development of individual airports. The document usually addresses a 20-year planning horizon with updates typically carried out every 5 years, as warranted. The Master Plan Report is very similar to a local community Comprehensive Plan in content and purpose: It identifies preferred long-range development options for the airport based on forecasted growth. The document is generated by an airport sponsor and its governing body to evaluate future growth and development needs based on the projected facility usage. FAA Advisory Circular (AC) 150/5070-6B, Airport Master Plans, provides criteria for the creation of an Airport Master Plan. As outlined in the AC, a typical master plan process includes the following elements: Inventory of facilities and airspace Forecast of anticipated growth in activity Demand/capacity analysis Facility requirements Alternative plan concepts Environmental overview Plan implementation ALP Public involvement process

Fundamentals 15 The master plan process should include a comprehensive public involvement strategy and encourage communication between stakeholders. Public input can provide a critical connection between the airport and the community, leading to improved compatible land use decisions. Source: Mead & Hunt, Inc. Figure 1. Sample Airport Layout Plan. ALP—The ALP is a drawing set that depicts existing airport facilities and proposed developments. An ALP can be an element of the Airport Master Plan or a stand-alone document. The ALP drawing set illustrates the existing and future airport facilities and all applicable design standards (from AC 150/5300-13, Airport Design). The drawing set will vary and may include sheets such as an approach sheet, an on-airport land use drawing, an off-airport land use drawing, and an airport property map. The drawing set provides a physical depiction of the existing conditions and future plans for development. FAA Grant Assurance 29 requires maintenance of an updated ALP for federally obligated airports (see Chapter 3, “Legal Considerations,” for discussion of grant assurances). FAA Standard Operating Procedure (SOP) 2.0, Standard Procedure for FAA Review and Approval of Airport Layout Plans (ALPs), is a valuable resource on this topic. LAND RELEASE—When an airport is grant obligated as a condition of accepting grant funds or surplus property, airport property is considered to be dedicated to airport purposes when it is defined as aeronautical use on the ALP or listed as such on the Exhibit ‘A’ property map. If that property is later not needed for airport purposes, FAA must take action to release the airport from the agreement. A release is a written authorization relinquishing FAA’s right to enforce an airport’s contractual obligations. If granted, a land release allows the airport to either (1) change the designation of property designated for aeronautical use to property for non-aeronautical use (while maintaining ownership of the property) or (2) sell a specific parcel of land outright. The process is explained in FAA Order 5190.6B, Airport Compliance Manual, specifically in Chapter 22, “Releases from Federal Obligations.”

16 Generating revenue from Commercial Development On or adjacent to airports Before taking action, FAA Airports District Offices (ADOs), regional airports divisions, and even FAA headquarters may evaluate the request based on the benefits to civil aviation, taking into consideration elements such as future operations, airport capacity, and the impact to airport users. Case study interview responses indicated that, in some cases, the need for a land release was a surprise to the airport. Also, in many cases, the land release process required much more time than anticipated. A written justification of the project A current ALP that shows the area to be released as being unnecessary for airport use A current Exhibit ‘A’ property map A Metes and Bounds Survey of the subject property to be released Documentation about how the land was originally acquired An Environmental Survey (often a Categorical Exclusion, or CATEX—see the section on regulatory constraints/permitting in Chapter 5 of this guidebook for more information) A Land Appraisal to determine fair market value for the specific type of activity (fee purchase or lease) Assembling these various documents into a complete application is a lengthy process in itself. Once the application has been submitted, FAA may take months to review and respond to it. Modifications may then be required in response to FAA comments. Once FAA is ready to move forward with an approval, the request is published in the Federal Register and a 30-day comment period is required. This last step is actually a 90-day process once the review and comment and collection of comments windows are included. It is reasonable to expect that a land release process could be completed in 6 to 12 months, but it would not be out of the question for the process to take multiple years. The land release process is further complicated by the fact that the airport must have a specific tenant or client identified and be able to describe the proposed use of the property in detail prior to it being released. This description typically includes a fairly detailed Site Plan. Just noting that a parcel is no longer necessary for airport purposes and would be marketed for some form of non-aeronautical use(s) is not an acceptable level of justification or detail. The proposed developers and tenants will also be operating with their own scheduling constraints and pressures. Needless to say, the developer’s timeline creates an additional push to move the process as quickly as possible. AIRPORT CAPITAL IMPROVEMENT PLAN (ACIP)—An ACIP is a summary of development goals, typically for a 5-year planning period, that is developed based on the Airport Master Plan. The Airport Master Plan and ACIP are intended to guide the continued growth and development of an airport. It is beneficial to make the plans available to elected officials, local planners, and local land use decision-makers to enhance their understanding of the airport’s needs and associated Obtaining a land release is a lengthy process that requires a dedication of staff time as well as professional consultants. The project research indicated that, even when applicants were successful in securing a land release, the process often took much longer than originally anticipated. The application to FAA, the FAA’s review, and the Federal Register publication requirement all contribute to the timeline. A complete application to FAA for a land release requires, at a minimum, several significant pieces, including:

Fundamentals 17 compatible land use issues during the evaluation process of proposed development projects within proximity to airport environs. DO Locate and review the airport planning documents that have been adopted by the airport sponsor, including the Airport Master Plan, the ALP, the Exhibit ‘A’ property map, and the ACIP. Complete the self-assessment checklist in Chapter 4 that explores the Airport Master Plan and the ALP.

18 Generating revenue from Commercial Development On or adjacent to airports 2.3 Community Planning KNOW Planning for development on or adjacent to airports will require work with local agencies. Local agencies’ land use powers come from a variety of sources including federal laws, state enabling legislation, and state constitutions. Across the country, two primary tools available for local control of land uses around airports are the Comprehensive Plan (a policy document) and the Zoning Ordinance (a regulatory document). Both of these tools play a part in guiding development on and adjacent to airports. The Comprehensive Plan sets forth the community’s expectations and visions for growth and land use over a 20-year planning horizon. The Zoning Ordinance establishes the current rules for permitted land uses, site development standards, and the permitting process. The Zoning Ordinance is important because, whether for safety reasons or for potential revenue generation, some land uses on properties adjacent to an airport will be more favorable than others. HAVE In Chapter 7, the discussion of land use planning for revenue generation explores the Comprehensive Plan and Zoning Ordinance. In Chapter 4, the self-assessment in the toolkit includes a section to explore the Community Master Plan and Zoning Ordinance. The content in this introductory chapter provides a basic understanding of the documents and their roles. COMPREHENSIVE PLAN—This policy document formalizes the community’s plan for future development as the result of a public process. Subsequent regulatory and financial decisions made by the community’s elected officials must align with the policy direction established by the Comprehensive Plan. The document often includes: Maps, charts, and text to explain goals and objectives for future development Past and present conditions and a forecast of anticipated future growth An inventory of resources within the community Projections for future growth guide planning efforts to invest in facilities and community resources that support growth and development, including utilities, roads, and recreation facilities. The Comprehensive Plan also defines the type, location, and density of future development and is used as a guide for creation and amendment of the Zoning Ordinance and to plan for capital improvements. All of these elements influence land use development in the community generally and adjacent to the airport specifically. ZONING ORDINANCE—A regulatory document of land use development standards, the Zoning Ordinance includes land use zoning districts that define the location, type of permitted use, and conditions for development in each geographic area of the community. For the purposes of this guidebook, the Zoning Ordinance is important to know about because it regulates the type and density of permitted development as well as the conditions of development in the community— including development on parts of an airport and adjacent to the airport. The Zoning Ordinance also is important to airports because it can be used to promote land use compatibility and airspace protection, and to minimize noise conflicts. AIRPORT LAND USE COMPATIBILITY PLAN (ALUCP)—More specific than a local Comprehensive Plan, the ALUCP promotes compatibility between local airports and the surrounding properties.

Fundamentals 19 Although the ALUCP is not intended specifically to encourage revenue generation from development adjacent to airports, the policies in the plan may influence land development options and patterns and, by extension, opportunities for revenue generation. ALUCPs are required in some states and voluntary in others, and specific content may vary depending on the state enabling legislation. Also, the geographic limits of an ALUCP may extend beyond a single municipal boundary, presenting an opportunity for coordinated land use planning between or among multiple communities for property adjacent to the airport. DO Locate and review the community planning documents that have been adopted by the airport’s host community (or communities), including the Comprehensive Plan and the Zoning Ordinance. Complete the self-assessment section in Chapter 4 of this guidebook, which explores community land use planning for revenue generation.

20 Generating revenue from Commercial Development On or adjacent to airports 2.4 Aviation Funding KNOW Potential funding for general aviation (GA) and commercial service airports comes typically from the sources listed in this section. AIP FUNDING—Funding for capital improvement projects is made available to National Plan of Integrated Airport Systems (NPIAS) airports through this grant program, which is authorized and appropriated through congressional action. Information about the NPIAS can be found in the National Plan of Integrated Airport Systems Report on FAA’s website. An overview of the AIP grant program can be found in Chapter 4 of FAA’s Airport Improvement Program (AIP) Handbook. AIP grant funding comes with conditions attached, called grant assurances. Airport sponsors who accept AIP grants become federally obligated to comply with the conditions of the grant assurances. (See Chapter 3, “Legal Considerations,” for more information on the topics of grant assurances and federal obligation.) PASSENGER FACILITY CHARGES (PFCs)—PFCs are a per-person fee collected by commercial service airlines on behalf of airports for passengers who board their flight at that airport. Airports may use PFCs for certain types of projects defined in federal law including as the local match portion of AIP grants. STATE GOVERNMENTS—Some state governments provide grant funding for aviation as part of their transportation programs. If available, these funds generally are competitive and typically the grants are funded through fees and taxes levied on aircraft owners and airport users, including revenue from fuel flowage fees. Similar to AIP grants, state funding typically comes with assurances about what airport sponsors must do as a condition of the receipt of funds. For information, visit the state’s Aeronautics Division website. (The website may be a stand-alone site or it may be included as part of a state’s Department of Transportation [DOT] website.) LOCAL FUNDING—Local funding often is provided in part through a general fund allocation to the airport. This occurs because airports that are sponsored by cities, counties, and states may not generate enough revenue to cover their costs (especially smaller airports without commercial air service). Although fees may be collected for airport operations, the amount received may not be enough to cover 100 percent of operating, construction, and maintenance costs. If the airport is part of a port district or an authority, the airport owner may also be authorized by the state legislature to levy taxes and fees to collect additional local funding. BORROWING MONEY—Tax-exempt bonds are the most frequent financial tool used to borrow money for major capital improvements. For airports owned by a public sponsor (city, county, or state), this tool includes general obligation bonds that are secured through the general tax authority. Another bonding option may be general airport revenue bonds (GARBs), which are bonds that are secured by the revenues of the airport and other revenues as defined in the bond indenture. GARBs are secured primarily by the revenues of the airport. AIRPORT REVENUE—Airport revenue is money generated through activities or property uses on the airport. In general, larger GA airports and airports with commercial passenger service and air cargo service generate more revenue because these airports have additional sources of income such as rent and usage fees, concession revenue, and PFCs from commercial passenger service.

Fundamentals 21 They also have the potential to house more lease-paying businesses within the terminal to support scheduled commercial passenger airline operations. HAVE Each airport maintains some record of its current funding sources as part of a budgeting process. The identification of funding sources will also help to identify potential restrictions, conditions or obligations that may impact development choices. It will also help to understand the airport’s current financial resources and economic health. The descriptions of potential funding sources in the preceding section provide guidebook users a basic understanding which they will find helpful in completing the self-assessment in Chapter 4. The toolkit in Chapter 4 includes a section to explore the airport’s budgeting process and its Strategic Business Plan, if available. DO To review aviation funding, locate and review the airport’s annual budget and Strategic Business Plan, if available. Develop an understanding of the airport’s current sources of aviation funding for operations and capital improvements, and complete the self-assessment section in Chapter 4 that explores the airport Strategic Business Plan and budgeting process.

22 Generating revenue from Commercial Development On or adjacent to airports 2.5 Development Plan KNOW A Development Plan, also called a Site Plan, is a graphic representation of the development intent for a parcel of land. The plan can include a range of details from sketch plan to construction documents. In its initial form, the plan may be conceptual, limited to showing building lots, building footprints, parking areas, and roads. More refined versions usually comprise a multi-sheet set with engineering design, including: A table of zoning data A survey of existing conditions Details and dimensions of roadways Proposed lot acreage Proposed building size Sewer, water, and storm drain lines Detention basins Grading plans Landscaping HAVE Chapter 6 in this guidebook presents two principal sections using a Stop/Go decision format. The first half of Chapter 6 addresses development and management planning steps and provides a path to creating a refined development program if one is warranted. The material in this section of Chapter 2 provides a basic understanding of the Development Plan (Site Plan), which is a key component of a comprehensive development strategy. SITE PLAN APPROVAL—In addition to working out site design and engineering for the developer and clarifying what can be fit on the property, the Development Plan is usually necessary to secure approval from municipal and/or county land use authorities (generally a planning board or zoning board). The local Zoning Ordinance and other relevant ordinances will dictate the plan details required for a complete application, including engineering, environmental, and topographic information as well as proposed buildings. Developers usually keep to the minimum requirements, reserving flexibility for the details not mandated to be shown in the application. The Site Plan must be reviewed and approved by the local land use authority for the developer to proceed to a construction permit. The approval is documented in an action by the approving authority, and usually refers specifically to the title and revision date of the Site Plan approved. The approved plan is also kept in the municipal or county offices as a record of what has been permitted in the way of land alteration and buildings. The applicability of local zoning regulation to airport property varies. As a rule of thumb, it does not apply in the airport operations areas (AOA), may apply to airport property outside of the AOA, and does apply to airport-owned property outside the airport boundary. The applicability of local zoning regulation should be confirmed for each specific location.

Fundamentals 23 DO Locate and review current or previous land development or site plans for on-airport property designated for non-aeronautical use as well as site plans for sites adjacent to the airport. These plans may be for sites where development has already occurred or sites where development was proposed but not constructed. Whether the property is developed or vacant, the site plans will likely include information such as site elevations, utility locations and size, and public easements, including drains and road right-of-way information, which all may be helpful for future development plans on and adjacent to the airport.

24 Generating revenue from Commercial Development On or adjacent to airports 2.6 Grant Obligations KNOW Approximately 3,400 public-use airports across the United States have either received federal grants or are eligible to receive federal grant funding should the opportunity and need arise. In exchange for federal airport development assistance (both monetary awards and transfer of federal property for airport purposes) airport sponsors make binding legal commitments to assure that the public’s interest in civil aviation will be served. An airport sponsor’s responsibilities are commonly referred to as its federal grant obligations or grant assurances. Some obligations are for the life of the project (not to exceed 20 years) and some continue in perpetuity as long as the airport remains in operation. A discussion of specific grant assurances can be found in Chapter 3 of this guidebook. Although AIP grant funds may not typically be used for projects that are intended for revenue generation, it is an important topic for the discussion of on-airport development for revenue generation because grant assurances impact a variety of development issues including site design, lease agreements, and financing. Information on these impacts is provided throughout the toolkits in chapters 4 through 7. HAVE Generally, the grant assurances have remained consistent through the three programs over time, but some changes have occurred as a result of the passage of various pieces of legislation. It is also possible for a grant agreement to contain special covenants or specific conditions. An airport also may become grant obligated as the result of accepting a transfer of surplus real property from the federal government for the purpose of generating revenue to support the airport’s aviation needs. This situation is similar to accepting federal grant money: when an airport accepts a transfer of federal property, it also accepts federal obligations, which may vary according to the specific transfer document. Generally, the descriptions of other federal obligations will resemble the language found in most grant agreements, but one or more special conditions may apply in relation to obligations that come with real property. Also, the obligations associated with the transfer of real property stay with the land, even if the land is sold, until they are released under the Surplus Property Act. DO An airport can become grant obligated by accepting money or property through several federal programs. Since 1946, FAA has issued monetary grants through three different programs. The current grant program is the AIP, pursuant to the Airport and Airway Improvement Act of 1982 (AAIA) as amended (Title 49 U.S.C. § 47101, et seq.). The grant obligations will typically be described in the grant documents, often called sponsor contracts. It is important that the airport sponsor confirm the specific obligations entailed to the airport through the documents associated with each specific grant award. If the airport has acceped monetary grant awards, the airport should confirm the authorizing legislation and the associated conditions or assurances. If the airport has accepted airport property, the sponsor should clearly understand how the airport property was acquired and whether obligations are associated with some or all of the property acquisition. Because sponsor assurances vary over time and project- specific circumstances, the only way to determine the airport sponsor’s federal obligations accurately is to review the language of each grant agreement.

Fundamentals 25 2.7 The Five Tiers KNOW Airport property and properties adjacent to airports are subject to varying degrees of FAA regulatory requirements and control. Obligated airports—airports that have accepted federal and/or state grants—also are subject, as a condition of those grants, to both broad and specific regulatory requirements addressing safety and economic conditions. The varying types of unobligated land parcels beyond the obligated airport boundaries are subject to tiers of lesser regulation. These regulatory tiers differ substantially depending upon how the airport property, or property near the airport, is owned, its degree of airport access, its site planning, and its case- specific circumstances. Development and airport revenue opportunities are directly affected and structured by the nature and extent of FAA’s economic regulatory oversight of the airport and adjacent non- airport-owned properties. Four key factors appear to be driving this: The nature of applicable FAA grant obligations Airport or airport agency ownership or non-ownership of the property Site planning and vertical limitations The type of access permitted to the airport grounds proper HAVE Given the interaction of these four factors, this guidebook groups development and development-related revenue opportunities into five distinct tiers. The five tiers are a consequence of how FAA has fashioned airport grant obligations in its Order 5190-6B, FAA Airport Compliance Manual. The five tiers are not cited in the FAA Order; rather, the identification of these tiers is a unique and specific finding of ACRP Project 03-39 and meant to guide the conversation about what may or may not be allowed to be developed based on the regulatory restrictions. These definitions can be used as a starting point to understand the type(s) of property available for property development on and adjacent to the airport. Tier 1—Airport- or airport agency-owned property, FAA obligated: Subject to all applicable FAA grant obligations Airport design limited by FAA airport design/layout standards Property considered part of the airport proper and controlled by the airport Most common type of airport agency-owned property Greatest horizontal and vertical site planning and development constraints Greatest land use constraints Greatest FAA controls/constraints on use of revenues Tier 2—Airport- or airport agency-owned property, not FAA obligated, with airport through- the-fence (TTF) access: Limited by FAA policy on TTF operations Property controlled by the airport agency but not technically part of the airport proper

26 Generating revenue from Commercial Development On or adjacent to airports Not a common type of airport agency-owned property Fewer land use constraints Airport agency has more latitude in development and revenue use May have reduced horizontal and vertical site planning constraints for airport agency Tier 3—Airport or airport agency-owned property, not FAA obligated, without airport TTF access: Generally not limited by FAA grant obligations Property controlled by the airport agency, but not technically part of the airport Not a common type of airport agency-owned property More development and revenue and latitude for airport agency Fewer land use constraints Fewer horizontal and vertical site planning constraints for airport agency Tier 4—Non-airport or non-airport agency property, not FAA obligated, with airport TTF access: Limited by FAA TTF grant obligations Property not controlled by the airport agency A common type of property Considerable development opportunities but constrained revenue opportunities for the airport agency Fewer land use constraints Slightly reduced horizontal and vertical site planning constraints Tier 5—Non-airport or non-airport agency property, not FAA obligated, without airport TTF access: Not limited by FAA grant obligations Property not controlled by the airport agency Most common type of property Considerable development opportunities but least revenue opportunities for the airport agency Fewest land use constraints Fewest horizontal and vertical site planning constraints

Fundamentals 27 Source: Mead & Hunt, Inc. Figure 2. Regulatory tiers. DO Review the definitions of the five tiers in light of the specific property on or adjacent to the airport that may be under consideration for development. Is the airport considering property development on land that falls in one or more of the five tiers? These terms are used throughout the toolkits in chapters 4 through 7 of this guidebook, so it will be important to understand the reference. Also, the level of development restriction or condition may help the guidebook user identify the best development strategy for the airport while working through the toolkit exercises. References to the five regulatory tiers are denoted using the following “five tier” icon:

28 Generating revenue from Commercial Development On or adjacent to airports 2.8 Summary This guidebook includes information regarding airport regulation, development, and funding, and also information about property development, management, and finance. Airport management and operations and property development are distinct, unique professions, and users of this guidebook may not be familiar with both. From this chapter, guidebook users can gain or refresh their basic understanding of cornerstone concepts related to aviation and community planning, aviation funding and grant obligations, and land development before turning to the toolkit chapters. The concept of the five tiers was developed from the ACRP Project 03-39 research as a way to support the conversation. Guidebook users who wish to reference more detailed definitions of the technical terminology used in the guidebook are encouraged to consult the glossary.