Understanding FAA Grant Assurance Obligations Volume 3: Research Report (2018)

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8 ACRP Project 03-38 (FY 2015) Understanding FAA Grant Assurance Obligations Task 8 Research Report Chapter 3 C H A P T E R 3 , S T A K E H O L D E R O U T R E A C H This Chapter describes the process and results of the research efforts in order to gather information on Grant Assurance Requirements from airport staff and airport tenants/users. Methods included focus groups, a webinar and a survey sponsored by the American Association of Airport Executives (AAAE). The next section of this Chapter describes the research/interview process, including the interviewees and the subject areas discussed. The section thereafter provides a summary of the results. Section 3.1, The Research Process 3.1.1 Airport Focus Groups 3.1.1.1 Airport Focus Group Process This phase of the research included three focus group sessions during airport industry association conferences. Each focus group followed the same format, as follows: (1) discussion of the problem statement that generated the research project; (2) discussion of the goals, objectives and intended deliverables of the research effort; (3) brief description of the ACRP concept and the Transportation Research Board’s role in the program; (4) identification of the project panel; and (5) solicitation of input on the Grant Assurance requirements and structure and content of the Guidebook. Although input was requested on the same topics from each airport focus group, the particular interests of participants in each session led to variations in results and responses. The issues discussed are identified in the Discussion of Research Results section of this chapter. Participants were also asked to provide a ranking of 15 Grant Assurance requirements or issues as important for special emphasis in the Guidebook. 3.1.1.2 Airport Focus Group Participation Details This section provides information on the makeup of the four focus groups. National Airports Conference Focus Group The first focus group was conducted at the AAAE Russell B. Hoyt National Airports Conference (NAC) during preliminary committee meetings and workshop sessions, held on September 20, 2015. In addition to AAAE staff, eight airport staff/executives attended and participated, representing a variety of airports, as set forth in Table R-1 (below). Some sponsors had multiple attendees, while some attendees worked for sponsors with multiple airports. As shown, all categories were represented, with smaller airports well represented. Seven of the participants completed the ranking sheet referenced above.

9 ACRP Project 03-38 (FY 2015) Understanding FAA Grant Assurance Obligations Task 8 Research Report Chapter 3 Table R1, Summary of NAC Participants FAA Airport Classification Number of Airports Represented Large Hub 1 Medium Hub 1 Small Hub 3 Non-Hub Primary 1 GA/Reliever 6 Source: AAAE National Airports Conference Focus Group ACI-NA Legal Steering Group Focus Group The second focus group was conducted with the ACI-NA Legal Affairs Committee Steering Group during the committee meetings preceding the ACI Annual Meeting and Exposition, held on October 3, 2015. Seventeen attorneys participated, with sixteen of those attorneys working directly for airports of various sizes as in-house counsel and one attorney working as outside counsel representing a variety of airports. Table R-2 below summarizes the categories of airports represented by in-house counsel in this focus group. One attorney represented an airport sponsor with two large hub airports. Multiple attorneys represented sponsors that operate reliever or general aviation airports as well as primary airports. As shown, large hub airport attorneys predominated the focus group, but many of the participants also represent general aviation airports. Seven of the participants completed the ranking sheet referenced above. Table R-2, Summary of ACI-NA Legal Steering Group Participants FAA Airport Classification Number of Airports Represented Large Hub 11 Medium Hub 2 Small Hub 2 Non-Hub Primary 1 GA/Reliever 19 Source: ACI-NA Legal Steering Group Focus Group

10 ACRP Project 03-38 (FY 2015) Understanding FAA Grant Assurance Obligations Task 8 Research Report Chapter 3 ACI-NA Finance Committee Focus Group The third airport focus group was conducted with the Reauthorization Working Group of the ACI-NA Finance Committee during the committee meetings preceding the ACI-NA Annual Conference and Exposition, held on October 3, 2015. Thirteen airport staff from 10 different sponsors participated. Four sponsors were duplications from the Legal Committee. One outside attorney and one consultant also participated. Table R-3 summarizes the airport categories represented in this focus group. Large hub airports predominated in attendance. Many airport sponsors represented also operate general aviation or reliever airports. Five participants in this focus group submitted ranking sheets. Table R-3, Summary of ACI-NA Finance Committee Participants FAA Airport Classification Number of Airports Represented Large Hub 5 Medium Hub 3 Small Hub 1 Non-Hub Primary 2 GA/Reliever 7 Source: ACI-NA Finance Committee Focus Group 3.1.2 Airport Webinar One webinar arranged with members of the ACI-NA Small Airport Committee was held. 3.1.2.1 Webinar Process The webinar employed the same format as the focus groups. As with the airport focus groups, the results and responses reflected the particular interests of the webinar participants. Participants were also asked to identify and rank five Grant Assurance requirements or issues (out of a total of 15 choices) that they believed most deserving of special emphasis in the Guidebook. 3.1.2.2 Webinar Participation Details Twenty-one individuals registered for the webinar, including 16 staff from airport sponsors and five consultants. About half that number signed on at the beginning of the webinar. Unfortunately, it appears that many of the initial participants did not fully understand that the purpose of the webinar was to obtain information from them, rather than to convey information. As a result, by the end of the webinar, only the ACI-NA staff and representatives from three airports were participating. Moreover, as reflected in the Discussion of Research Results section, input was limited. Three participants completed ranking sheets, but one of the three identified five requirements or issues without ranking them.

11 ACRP Project 03-38 (FY 2015) Understanding FAA Grant Assurance Obligations Task 8 Research Report Chapter 3 3.1.3 Airport User Focus Group A focus group was conducted with staff from three airport user associations — the National Air Transportation Association (NATA), National Business Aircraft Association (NBAA) and the Airport Owners and Pilots Association (AOPA). Individual NATA members also participated by phone. 3.1.3.1 Airport User Focus Group Process The Airport User Focus Group followed the same format as the airport focus groups, but a more limited range of topics was identified for discussion than was the case for the airport focus groups and webinar. The issues discussed are identified in the Discussion of Research Results section of this Chapter. Participants were also asked to identify and rank five Grant Assurance requirements or issues (out of a total of 15 choices) that they believed were most deserving of special emphasis in the Guidebook. 3.1.3.2 Airport User Focus Group Participation A total of seven association staff participated in-person or by phone, as well as outside counsel for the NBAA. Fourteen NATA members participated. Table R-4 below summarizes the types of businesses represented by the individual NATA members. A majority of participants represented full service FBOs, but aircraft sales, leasing and charter business, as well as hangar and facility leasing businesses, were also represented. Two individual NATA members participating in the focus group completed the ranking sheet referenced above. Table R 4, Summary of Individual NATA Member Focus Group Participants Business Type Participants Full Service FBO 8 Aircraft Sales, Leasing, Charter, Management 2 Consultant, Management, Business Services 3 Hangar/Facility Leasing 1 Source: Airport User Association Focus Group 3.1.4 AAAE Member Survey AAAE staff assisted the research team in conducting a web-based survey of members of the Finance and Administration Committee.

12 ACRP Project 03-38 (FY 2015) Understanding FAA Grant Assurance Obligations Task 8 Research Report Chapter 3 3.1.4.1 Survey Process AAAE staff distributed an e-mail invitation to the Finance and Administration Committee members to participate in a web-based survey. The survey was available for response for three weeks. Committee members received one reminder e-mail during the period of availability. The survey instrument included a total of 21 questions. However, depending on the answer given to some questions, follow-on questions on the same subject would be skipped. In addition to identifying information, the survey addressed eight subjects, including the Grant Assurance requirements or issues most deserving of special emphasis in the Guidebook. The issues covered in the survey are identified in the Discussion of Research Results section of this report. 3.1.4.2 Survey Participation Details Fifteen individuals logged on to the Survey Monkey web-site — two consultants and 13 airport staff. However, one consultant did not complete any questions. Two more participants (one consultant and one airport staff) completed only the first few questions. Table 5 summarizes the categories of respondents to this survey, including those providing limited responses. One of the respondents, representing a medium hub and reliever airport, also participated in one or more of the airport focus groups. As shown, staff from small airports (small hub and smaller) predominated. Table 5, Summary of AAAE Survey Participants FAA Airport Classification Number Large Hub 0 Medium Hub 1 Small Hub 5 Non-Hub Primary 6 GA/Reliever 3 Consultants 1 Source: AAAE Finance & Administration Committee Survey Section 3.2, Discussion of Research Results, Focus Groups and Webinar This section discusses the interview results of the focus groups and webinar. Because the format of the survey and subject areas covered were different from those of the focus groups and webinar, the results will be discussed separately. As noted, the airport focus groups and webinar generally requested input on the same issues:  What are the Grant Assurances or compliance issues that are the current focus of the participants?

13 ACRP Project 03-38 (FY 2015) Understanding FAA Grant Assurance Obligations Task 8 Research Report Chapter 3  What Grant Assurances are “working well” or are well understood?  What Grant Assurances are hard to understand or causing “pain points”?  What Grant Assurance issues do you consider to be associated with the growth of unmanned aeronautical systems (UASs) and development of on-airport hotels or the aerotropolis concept?  What resources or references do you rely on most to help understand Grant Assurance requirements?  What information do you find most beneficial in a Guidebook and how should it be organized to be the most helpful? The three airport focus group participants were also asked to rank a total of 15 Grant Assurance requirements or issues in order of importance for special emphasis in the Guidebook. Webinar participants were asked to identify and rank the five most important requirements or issues for special emphasis. The discussion in the Airport User Focus Group was somewhat different. Subject areas were limited to the following:  Grant Assurances that are “working well” or seem to be well understood;  Grant Assurances that are hard to understand or constitute “pain points.”  Examples of airports that are easy to deal with or examples of positive airport practices. Participants in this focus group were also asked to identify and rank the five Grant Assurance requirements or issues most deserving of important special emphasis in the Guidebook. The discussions of the various issues are summarized below. 3.2.1 Grant Assurances That Are Currently the Focus of Participants 3.2.1.1 Airport Focus Groups and Webinar The NAC Focus Group identified 10 requirements or issues on which participants were currently focused, as follows:  Concessions (Grant Assurance 37, Disadvantaged Business Enterprises as it governs airport concession disadvantaged business enterprise (ACDBE) participation.  Plans and specifications (Grant Assurance 16)  Land development (multiple Grant Assurances)  Disposal of land (Grant Assurance 31)  Minimum standards (Grant Assurance 22.h, Economic Nondiscrimination)  Planning and environment (Multiple Grant Assurances)  Revenue Diversion (Grant Assurance 25)  Delay in resolving a Part 16 complaint over a denial of access to an aeronautical operator whose activities had previously been identified as unsafe by FAA safety personnel.  Other responses included (1) requesting information to give to an airport board so they may fully understand Grant Assurances; and (2) requesting that each Grant Assurance be stated in plain English so that they are easy to comprehend.

14 ACRP Project 03-38 (FY 2015) Understanding FAA Grant Assurance Obligations Task 8 Research Report Chapter 3  One airport was frustrated with the lack of support from the FAA in litigation with an FBO after the airport permitted a second FBO to start operating, thus eliminating the first FBO’s prohibited exclusive right. Notably, two of the issues had to do with delays in obtaining FAA determinations or lack of support from the FAA for actions the participants believed were consistent with, if not required by, the Grant Assurances. The ACI-NA Legal Focus Group identified seven subjects they wanted to discuss, as follows:  Financial Sustainability / Self-Sustaining (Grant Assurance 24)  Revenue Use and Revenue Diversion, especially with community-use rental rates (Grant Assurance 25)  Incentive programs (multiple assurances)  Economic Nondiscrimination; in particular, access (Grant Assurance 22)  Safe and Efficient Operations (Grant Assurance 19)  Self-fueling for GA (Grant Assurance 22)  FAA methodology for updating and promulgating Grant Assurance requirements The ACI-Finance Focus Group identified five subjects as current issues, as follows:  Revenue Diversion (Grant Assurance 25)  Land use — changing land from airport to non-airport; what Grant Assurances are forever vs. having time limits?  Economic Nondiscrimination (Grant Assurance 22)  Fee and Rental Structure (non-aeronautical) (Grant Assurance 24)  Compliance The ACI-NA Small Airport Webinar participants identified five subjects, as follows:  Land use — changing land from airport to non-airport; what Grant Assurances are forever vs. time limited?  Economic Nondiscrimination (Grant Assurance 22)  Fee and Rental Structure (non-aeronautical) (Grant Assurance 24)  Revenue Diversion (Grant Assurance 25)  Compliance There was a limited overlap in the subjects identified. Only three Grant Assurances were mentioned in multiple sessions. Only Grant Assurance 25, Airport Revenues, was identified in all sessions, and the particular issues varied. For example, one focus group raised issues with the treatment of proceeds from the disposal of AIP funded noise land (NAC Focus Group); participants in both the ACI-NA Legal Focus Group and the Small Airport Webinar raised issues with the lack of a de minimis standard that would permit small amounts of airport revenue to be used for airport purposes without strict scrutiny by the FAA. Grant Assurance 24, Fee and Rental Structure, was identified in the webinar and two of the airport focus groups (ACI-NA Legal and ACI-NA Finance). Once again, however, there was a wide range of specific issues raised. For example, one ACI-NA Small Airport Webinar participant mentioned the

15 ACRP Project 03-38 (FY 2015) Understanding FAA Grant Assurance Obligations Task 8 Research Report Chapter 3 standards for providing space and facilities to federal agencies at no cost. Much of the discussion in the ACI-NA Legal Focus Group involved the role that appraisals should play in determining FMV, and changing FAA policies on this subject. The three airport focus groups each identified Grant Assurance 22, Economic Nondiscrimination, as an area of concern. However, as with the other assurances discussed, the specific concerns varied. The NAC Focus Group identified the requirement that minimum standards be reasonable. The ACI-NA Legal Focus Group identified requirements for the regulation of aircraft self-fueling, while the ACI-NA Finance Focus Group identified the Grant Assurance in general. 3.2.1.2 Airport User Focus Group The Airport User Focus Group did not include a discussion of the Grant Assurance requirements or issues that were of particular interest to the participants or members of their respective associations. Rather, the discussion focused on the Grant Assurances that “work well” or are well understood and those that are hard to understand or “pain points.” The discussion of the latter, however, indicates the issues of most concern. Focus group participants identified six Grant Assurances as hard to understand, as specified in Section 3.2.3.2. Three of the six were the same three mentioned in multiple airport outreach fora — Grant Assurance 22, Economic Nondiscrimination, Grant Assurance 24, Fee and Rental Structure, and Grant Assurance 25, Airport Revenues. However, the specific concerns were not the same as those of the airports. For example, the issue of sudden substantial increases in fees under Grant Assurance 24 was discussed extensively. Interestingly, the airport users also raised concerns about the application of the FAA’s policy on the use of appraisals, as did the ACI-NA Legal Focus Group. The airport users were also very concerned about Grant Assurance 21, Compatible Land Use, and encroachment of airports by non- compatible land-uses. 3.2.1.3 Conclusions While specific issues with individual Grant Assurances may vary, the focus group and webinar process identified the Grant Assurances that consistently generate concerns among airport staff and airport users — Grant Assurance 22, Economic Nondiscrimination; Grant Assurance 24, Fee and Rental Structure and Grant Assurance 25, Airport Revenue. This is consistent with the patterns developed in interviews with FAA staff and state block grant compliance specialists. Two of these assurances — Grant Assurance 22 and Grant Assurance 24 — were consistently identified by the compliance specialists as frequently generating questions or discussions. The third, Grant Assurance 25, was identified by multiple compliance specialists as a frequent subject. 3.2.2 Grant Assurances That Are Well Understood or “Working Well” 3.2.2.1 Airport Focus Groups and Webinar The NAC Focus Group identified only two Grant Assurances — Grant Assurance 17, Construction Inspection and Approval and Grant Assurance 24, Fee and Rental Structure. However, one participant in the NAC Focus Group also identified current FAA policy under Grant Assurance 17 as hard to understand or a “pain point.”

16 ACRP Project 03-38 (FY 2015) Understanding FAA Grant Assurance Obligations Task 8 Research Report Chapter 3 The ACI-NA Legal Focus Group did not identify any particular Grant Assurance as well understood or “working well.” Rather, much of the discussion addressed specific issues or subjects that participants believed were not well understood, or needed clarification, or adjustments to FAA policy. During this focus group, and the remaining stakeholder outreach efforts summarized in this section, the research team clearly communicated that the purpose of the research effort was not to develop recommendations for policy changes, but only to clarify current requirements under the Grant Assurances. The ACI-Finance Focus Group likewise did not identify particular Grant Assurances as well understood or “working well.” One participant observed that smaller airports tended to deal with Grant Assurance issues more than larger ones. The Small Airport Webinar participants also did not single out specific Grant Assurances. Rather, one participant identified the strategy of maintaining communications with airport users through various means as an effective tool towards minimizing disputes. Another participant cited examples of programs or policies to show general aviation users that they are appreciated and helpful in order to minimize disputes. 3.2.2.2 Airport User Focus Group The Airport User Focus Group did not identify Grant Assurances as well understood. Rather, they identified six Grant Assurances, for which good information was available, as follows:  Operation and Maintenance (Grant Assurance 19)  Compatible Land Use (Grant Assurance 21)  Economic Nondiscrimination (Grant Assurance 22)  Exclusive Rights (Grant Assurance 23)  Fee and Rental Structure (Grant Assurance 24)  Airport Revenues (Grant Assurance 25) Grant Assurance 24 was also mentioned in the NAC Focus Group. Interestingly, all six of the Grant Assurances listed above were also listed as hard to understand or causing “pain points,” as discussed in Section 3.2.3.2 below. 3.2.2.3 Conclusions There was limited discussion of Grant Assurances that are well understood or “working well.” This result is not unexpected because it would be reasonable for participants to want to focus on the areas and issues causing them concern. Furthermore, the discussions that occurred were inconsistent. As noted in two focus groups, the same Grant Assurance was identified as well understood or “working well” on the one hand, and hard to understand or a “pain point” on the other. Also, Grant Assurance 24, Fee and Rental Structure, identified as well understood in the NAC Focus Group, yet was identified as an area of concern or “pain point” in the other focus groups and webinar, as discussed in the next section.

17 ACRP Project 03-38 (FY 2015) Understanding FAA Grant Assurance Obligations Task 8Research Report Chapter 3 3.2.3 Grant Assurances That Are Hard to Understand or Causing “Pain Points” 3.2.3.1 Airport Focus Groups and Webinar The NAC Focus Group identified only one specific Grant Assurance as hard to understand, which was Grant Assurance 17, Construction Inspection and Approval. For this Grant Assurance, participants noted in particular more stringent standards and the difficulty of using alternative delivery methods for AIP funded projects. However, some participants in this focus group identified Grant Assurance 17 as one that was going well. Aside from Grant Assurance 17, the NAC Focus Group identified six issues as hard to understand without reference to any particular Grant Assurance. Two involved requirements or policies for grant-funded projects. Participants also requested clarification of the status of activities as aeronautical or non-aeronautical. The ACI-NA Legal Focus Group did not identify hard to understand Grant Assurances per se. However, the discussion of the requirements or issues of concern (as described in a preceding section) generally focus on issues that were not well understood or requirements that were hard to meet. As noted, these assurances included Grant Assurance 24, Fee and Rental Structure, Grant Assurance 25, Airport Revenues, and Grant Assurance 22, Economic Nondiscrimination. The method of determining FMV under Grant Assurance 24 generated substantial discussion. One concern was that the FAA would consider obtaining less than the appraised value for property to be a violation, even when the airport had engaged in an open solicitation process with all resulting offers less than the appraisal. There was also a concern about applying FMV in leases with long terms, such as 50 years. Similarly, the ACI-NA Finance Focus Group did not specifically identify Grant Assurance requirements or issues as hard to understand per se. However, the discussion focused on Grant Assurance 25, Airport Revenues. The discussion of the four issues of current concern in the ACI-NA Small Airport Webinar (referenced previously) focused on questions or the need for clarification. These issues could be considered as hard to understand to the participants. The issues included leases and sponsors operating as the airport’s single FBO (proprietary exclusive right). 3.2.3.2 Airport User Focus Group The Airport User Focus Group identified six Grant Assurances as hard to understand or “pain points,” as follows:  Operation and Maintenance (Grant Assurance 19)  Compatible Land Use (Grant Assurance 21)  Economic Nondiscrimination (Grant Assurance 22)  Exclusive Rights (Grant Assurance 23)  Fee and Rental Structure (Grant Assurance 24)  Airport Revenues (Grant Assurance 25) Participants were concerned about policies for applying FMV appraisals in lease negotiations, as well as other leasing issues. Among the leasing issues was FAA policy concerning permissible length of leases.

18 ACRP Project 03-38 (FY 2015) Understanding FAA Grant Assurance Obligations Task 8 Research Report Chapter 3 3.2.3.3 Conclusions It is noteworthy to state that airport staff and airport users alike identified Grant Assurance 24, Fee and Rental Structure and Grant Assurance 25, Airport Revenues as hard to understand. Equally noteworthy is the common concern of airport users and one of the airport focus groups over the use of independent appraisals to determine FMV under Grant Assurance 24. 3.2.4 Grant Assurance Issues with Current Aviation/Airport Trends The airport focus groups and webinar were asked to discuss any Grant Compliance concerns related to three current aviation airport trends — unmanned aerial systems (UAS), on-airport hotels and the aerotropolis concept. The latter two issues were identified as somewhat related. 3.2.4.1 UASs The NAC Focus Group did not identify any particular Grant Compliance issues, but noted that multiple AAAE committees are engaged and studying this issue. They nevertheless recommended that the Guidebook include scenarios for UAS operation on or near airports. The ACI-NA Legal Focus Group noted insurance issues, but did not identify specific Grant Assurance issues. Neither the ACI-NA Finance Focus Group nor the ACI-NA Small Airport Webinar participants identified any issues related to UASs. The Airport User Focus Group identified the status of UAS operations as aeronautical or non- aeronautical as a potential compliance issue because that status affects the lease rates the airport can charge under Grant Assurance 24, Fee and Rental Structure. 3.2.4.2 Airport Hotels & Aerotropolis Concept The NAC Focus Group identified a number of issues ranging from the need to get FMV, the challenges of assuring compatible land-uses, and the importance of working with the community and all stakeholders. The focus group identified Dallas Fort Worth International Airport, Memphis International Airport, and Washington Dulles International Airport as good examples of successful implementation of the aerotropolis concept. The ACI-NA Legal Focus Group participants identified Grant Assurance 25, Airport Revenues, as the primary compliance issue. One specific issue identified was the use of airport revenue for off airport infrastructure that supports commercial development on the airport. Neither the ACI-NA Finance Focus Group nor the ACI-NA Small Airport Webinar participants identified any issues related to the aerotropolis concept. The Airport User Focus Group did not identify any Compliance issues connected with on-airport hotels or the aerotropolis concept.

19 ACRP Project 03-38 (FY 2015) Understanding FAA Grant Assurance Obligations Task 8 Research Report Chapter 3 3.2.4.3 Conclusions Neither UAS operations near airports nor on-airport hotels/aerotropolis concept generated substantial discussion in the focus groups and webinar. The limited discussion of Grant Assurance requirements focused on financial requirements — Grant Assurance 24, Fee and Rental Structure and Grant Assurance 25, Airport Revenues. Given the limited discussion and limited guidance on Grant Assurance requirements related to these issues, they are not highlighted in the Guidebook. 3.2.5 Most Helpful Resources and References Some of the focus groups and webinars discussed the resources and references participants currently use to understand the Grant Assurance requirements. 3.2.5.1 Airport Focus Groups and Webinar NAC Focus Group participants identified nine resources, including attorneys, consultants, the FAA, Grant Assurance text and Order 5190.6B. The ACI-NA Legal Focus Group focused on FAA and DOT compliance documents that were sometimes difficult to respond to. The DOT Office of Inspector General (OIG) revenue use audit reports were identified as especially difficult because the OIG’s interpretation of Grant Assurance 25 does not always coincide with the FAA’s. The ACI-NA Finance Focus Group identified two resources — ACRP LRD 21, Compilation of DOT and FAA Legal Determinations and Opinion Letters Through December 2012 and airport attorneys. One participant in the ACI-NA Small Airport Webinar discussed resources and references relied on, identifying five — Order 5190.6B, ACRP publications, FAA staff, other airport contacts and airport attorneys. 3.2.5.2 Airport User Focus Group The issue of resources and references used to understand the Grant Assurance requirements was not discussed. 3.2.5.3 Conclusions For the participants that discussed the issue, FAA staff, outside consultants or attorneys and Order 5190.6A were mentioned multiple times. These resources could be characterized as the most commonly relied upon. 3.2.6 Content and Format of Guidebook The focus groups and webinar participants were asked to discuss their recommendations for format and content of the Guidebook. The airport focus groups and webinar were also asked, “If the Guidebook could do only one thing, what is it?”

20 ACRP Project 03-38 (FY 2015) Understanding FAA Grant Assurance Obligations Task 8 Research Report Chapter 3 3.2.6.1 Airport Focus Groups and Webinar 3.2.6.1a Guidebook Content and Format The NAC Focus Group identified six subjects to be covered in the Guidebook. Some involved specific Grant Assurances — such as Grant Assurance 25, Airport Revenues. Others were general topics, such as Grant Assurances related to GA airports or common pitfalls of Grant Assurances. Participants suggested that the Guidebook be written in plain English and include examples. They also suggested a smaller “pull out” section that could be used to brief executives. They recommended organizing the Guidebook by subjects and including discussions of the linkages between Grant Assurances. The ACI-NA Legal Focus Group did not address content, except to recommend that the text be written in plain English and include examples. They also recommended that the Guidebook include a discussion of best practices. An important issue for this focus group was the process for reviewing drafts. Participants urged the Unison Team to share drafts of the Guidebook with airport attorneys, and this process was followed. The ACI-NA Finance Focus Group identified two subjects that were important to address — compatible land use (Grant Assurance 21) and airport revenue diversion (Grant Assurance 25). They also encouraged the use of case studies. The Guidebook and accompanying Technical Appendix do not include case studies, but include numerous examples of practices found to be in compliance or in non- compliance in individual administrative determinations, advisory opinions and judicial decisions. The ACI-NA Small Airport Webinar participants requested that the Guidebook address construction inspection. They also recommended distinguishing between “mandatory” and optional provisions in leases. In addition, searchable text with bookmarks is desirable, along with a section on frequently asked questions. 3.2.6.1b “What Is One Thing the Guidebook Should Do?” The participants in the NAC Focus Group had five different responses when asked this question. Responses included clear and concise explanations of each Grant Assurance in laymen’s terms, a separate pull out section for governing bodies and a discussion of linkages between the assurances. The discussion in the ACI-NA Legal Focus Group did not focus on a single critical feature of the Guidebook. The question was discussed in the ACI-NA Finance Focus Group, but only one specific recommendation was made — “Reduce complex issues into manageable language.” The question was discussed in the ACI-NA Small Airport Webinar, but the participants did not single out specific issues. 3.2.6.2 Airport User Focus Group 3.2.6.2a Guidebook Content and Format The Airport User Focus Group provided 10 specific recommendations for the format and content of the Guidebook, yet recommendations sometimes conflicted. For example, one participant recommended discussing the Grant Assurances sequentially, while another suggested that grouping the assurances by subject area would be more helpful. Other recommendations included a discussion of the linkages

21 ACRP Project 03-38 (FY 2015) Understanding FAA Grant Assurance Obligations Task 8 Research Report Chapter 3 between Grant Assurances, case examples and a searchable Q & A section. The airport users were not asked to specify “one thing” the Guidebook should do. 3.2.6.3 Conclusions Three common concerns or suggestions emerged from the discussion of the content and format of the Guidebook, including the preference for “just one thing” the Guidebook should do, as follows:  Explaining the Grant Assurance Requirements in plain English;  Providing case studies or examples; and  Providing a resource that can be readily used with senior airport executives and governing bodies. 3.2.7 Examples of Airports Doing a Good Job The Airport User Focus Group was asked to identify airports that are doing a good job of Grant Assurance compliance, or recommended airport practices. One participant identified airports with advisory boards as generally doing a better job than others. Another suggested that “mid-size airports” with limited dedicated staff and limited resources to retain outside counsel or experts may have more difficulty in maintaining compliance. One participant identified three airports or airport sponsors — Scottsdale, AZ, Centennial, CO, and the Port of Portland, OR. 3.2.8 Ranking of Grant Assurance Requirements/Issues for Special Emphasis The airport focus groups, airport webinar and airport user focus group were asked to rank 15 Grant Assurance requirements or issues for special emphasis in the Guidebook. The ranking requests were not the same across all groups, and results are reported below based on the nature of the ranking request. 3.2.8.1 Three Airport Focus Group Rankings The three airport focus groups were asked to rank all 15 Grant Assurance requirements or issues in order of importance, with one being the most important and 15 being the least important. Table R-6 below provides a summary ranking for these three focus groups. The table shows the average ranking from each focus group, as well as a combined ranking. Considering the most important requirements or issues, all three focus groups rated Grant Assurance 25, Airport Revenues, as the most important for special consideration. One more requirement, Grant Assurances 22.a.-d., requiring reasonable and not Unjustly Discriminatory Fee and Rental Structures, was rated as one of the five most important by all three focus groups. As shown in Table R-6, two more requirements were ranked as one of the five most important by two of the three focus groups — Grant Assurance 24, Fee and Rental Structure, and Grant Assurance 22.a, which requires sponsors to provide reasonable access to aeronautical users.

22 ACRP Project 03-38 (FY 2015) Understanding FAA Grant Assurance Obligations Task 8 Research Report Chapter 3 Table R-6, Summary of Airport Focus Group of Grant Assurance Rankings Combined  Rank  Requirement  AAAE  NAC  ACI‐NA  Legal  ACI‐NA  Finance  TOTAL1  1.  No. 25 Requirements for use of airport revenue  1  1  1  3  2.  No's 22.a‐22.d Requirement for reasonable and not  unjustly discriminatory fees and rents  4  3  2  9  3.  No. 24 Requirement for self‐sustaining fee and rental  structure  6  2  5  13  4.  No. 22.a Reasonable and not unjustly discriminatory access for commercial aeronautical users i l 5  5  6  16  5.  Nos. 22, 24, 25 Airport sponsor air service incentives  14  4  3  21  6.  Requirements for planning and implementing grant funded projects (multiple assurances)  7  11  4  22  7.  No. 23 Exclusive rights  3  12  7  22  8.  2  9  12  23  9.  8  6  13  27  10.  10  7  14  31  11.  12  8  11  31  12.  11  14  8  33  13.  9  10  15  34  14.  15  13  9  37  15.  No. 19 Requirement to operate in a safe and  efficient  manner  No. 22.h Reasonable and non‐unjustly discriminatory  conditions (minimum standards)  No. 22.a Reasonable and not unjustly discriminatory access for aircraft owners and operators Formal complaint and investigation procedures  under 14 CFR Part 16  Nos. 22.g, 23, Requirements and restrictions on the  "Proprietary Exclusive"  No.22.f Right of aircraft owners / operators to self‐  service and self‐fuel  Restrictions and requirements for "through the  fence" aeronautical activities (multiple assurances)  Informal Investigation Procedures under 14 CFR Part  13  13  15  10  38  16.  Limitations on the use of airport property2 1 The three focus groups were asked to rank 15 requirements/issues in order of importance for special emphasis  with "1" being the most important. Therefore the requirement/issue with the lowest total ranking is   considered to be the most important, etc. Order of ranking is based on the consolidated results of the three in‐  person focus groups.  2 The AAAE Finance and Admin survey included one additional requirement/issue ‐‐ Limitations on the use of  airport property. For convenience, it was assigned to position No. 16 in the Table, because it was not included  in other questionnaires.  Source: NAC, ACI-NA Legal Committee and ACI-NA Finance Committee Steering Groups

23 ACRP Project 03-38 (FY 2015) Understanding FAA Grant Assurance Obligations Task 8 Research Report Chapter 3 3.2.8.2 Small Airport Committee Webinar The Small Airport Committee Webinar was asked to identify the five most important requirements out of 15. They were not asked to rank the five. Three participants provided their selections. Table 7 summarizes the results. Because they were not asked to rank the requirements of issues, the requirement or issue with the most responses is considered the most important. A total of 11 requirements or issues were identified by at least one participant. One requirement was identified by all three participants, Grant Assurance 24, Fee and Rental Structure. Two more requirements were identified by two participants — Grant Assurance 25, Airport Revenues, and Requirements for Grant-Funded Projects. Two of the requirements considered important by multiple participants in the ACI-NA Small Airport Webinar — Grant Assurance 24 and Grant Assurance 25, were also ranked as among the five most important in the airport focus groups, as reflected in Table R-6. Table R-7, ACI-NA Small Airport Webinar Ranking of Grant Assurance Requirements Rank*  Response 1 Response 2 Response  3  Total  Responses 1.  No. 24 Requirement for self‐sustaining fee and rental  structure     3  2.  Requirements  for planning and  implementing  grant‐ funded projects  (multiple  assurances)    2  3.  No. 25 Requirements for use of airport revenue    2  4.   1  5.   1  6.   1  7.  No. 22.a Reasonable and  not unjustly discriminatory  access for commercial aeronautical users No. 19 Requirement to operate in a safe and  efficient  manner  Restrictions and requirements for "through the  fence" aeronautical  activities  (multiple  assurances)  Informal  Investigation Procedures under 14 CFR Part  13   1  8.  Formal  complaint and  investigation procedures  under  14 CFR Part 16   1  9.  No.22.f Right of aircraft owners / operators to self‐  service and self‐fuel   1  10.  Nos. 22.a‐22.d Requirement for reasonable and not  unjustly discriminatory fees and rents   1  11.  Nos. 22, 24, 25 Airport sponsor air service incentives   1  * Participants were   asked to identify the  five most important Grant Assurance Requirements/Issues for emphasis in the Guidebook without ranking.  Therefore, requirements identified by the most participants are  ranked as most  important (Rank #1), by the second most participants as second, etc.  Source: ACI-NA Small Airport Committee Webinar. 3.2.8.3 Airport User Focus Group Participants in the Airport User Focus Group were asked to identify and rank the top five out of 16 Grant Assurance requirements or issues and to also provide the rankings as a follow-up to the focus group. Only two participants responded.

24 ACRP Project 03-38 (FY 2015) Understanding FAA Grant Assurance Obligations Task 8 Research Report Chapter 3 The participants were asked to identify the five most important requirements to receive special emphasis in the Guidebook and to rank them with “1,” representing the most important, “2,” representing the second most important, etc. The two participants identified three Grant Assurance requirements in common — Grant Assurance 19, Operation and Maintenance, Grant Assurance 24, Fee and Rental Structure, and requirements for exercise of the “Proprietary Exclusive Right” to offer commercial aeronautical services (Grant Assurances 23 and 22.g). The Proprietary Exclusive requirements were highest ranked, placing first and second on the two responses. 3.2.8.4 Conclusions All three airport focus groups rated Grant Assurance 25, Airport Revenues, as the most important requirement for special emphasis, and this requirement was identified by multiple participants in the ACI- NA Small Airport Webinar. One other requirement — Grant Assurance 24, Fee and Rental Structure — also ranked highly in the airport focus groups and the webinar. These results are consistent with responses to questions regarding the Grant Assurances that were of greatest concerns or most difficult to understand and implement, as discussed in preceding sections. For the airport users, the proprietary exclusive rights requirements were most important. This result is understandable because many of the participants themselves were commercial aeronautical service providers or substantial users of commercial aeronautical service providers that are especially affected by a sponsor’s decision to offer commercial aeronautical services directly. Section 3.3, Discussion of Research Results, AAAE Finance and Administration Committee Survey The survey questionnaire submitted to the AAAE Finance and Administration Committee (F & A Committee) addressed the following issues: 1. The frequency that Grant Assurances discussed with each of the following, in 25% increments (e.g., never, 1-25%, 26-50%) a. Air carriers b. Other commercial aeronautical users/tenants c. Non-commercial aeronautical users/tenants d. Airport governing bodies, local officials etc. 2. The Grant Assurance requirements/issues that are discussed most often 3. The Grant Assurance requirements/issues that are the hardest to understand 4. Two resources used most often to understand Grant Assurances 5. Experience with FAA investigations under 14 CFR Part 13 and 14 CFR Part 16 6. Format of Guidebook 7. Content of summary pages for each Grant Assurance 8. Selection (without ranking) of the five most important Grant Assurance requirements/ issues for special emphasis in the Guidebook For issues 2, and 3, the participants were asked to select from a total of 16 requirements or issues without limitation. Issue 8 required selection from the same 16 requirements or issues.

25 ACRP Project 03-38 (FY 2015) Understanding FAA Grant Assurance Obligations Task 8 Research Report Chapter 3 Twelve participants completed the entire questionnaire. Two more participants completed only some of the questions. The results of the survey are summarized below. 3.3.1 Frequency of Discussion of Grant Assurances with Stakeholders. Figure R-1 through Figure R-4 show the distribution of responses to questions regarding the frequency that Grant Assurances are discussed with various stakeholders. Source: AAAE Finance & Administration Committee Survey Figure R-1, Frequency of Grant Assurance Discussion with Air Carriers

26 ACRP Project 03-38 (FY 2015) Understanding FAA Grant Assurance Obligations Task 8 Research Report Chapter 3 Source: AAAE Finance & Administration Committee Survey Figure R-2, Frequency of Discussion of Grant Assurances with Other Commercial Aeronautical Tenants Source: AAAE Finance & Administration Committee Survey Figure R-3, Frequency of Discussion of Grant Assurances with Non-Commercial Aeronautical Tenants

27 ACRP Project 03-38 (FY 2015) Understanding FAA Grant Assurance Obligations Task 8 Research Report Chapter 3 Source: AAAE Finance & Administration Committee Survey Figure R-4, Frequency of Discussion of Grant Assurances with Governing Bodies, Local Officials, etc. The results are markedly different for air carriers and other aeronautical users. A substantial majority (72%) of respondents reported discussing Grant Assurances infrequently (25% or less of the time) with air carriers, while a majority of respondents reported discussing Grant Assurances frequently (51% or more of the time) with other aeronautical tenants (60% for commercial tenants and 61% for non- commercial tenants). A majority of respondents (70%) also reported discussing Grant Assurances frequently with their governing bodies and other local officials. A substantial portion of respondents (15- 22%) reported never discussing Grant Assurances with one or more category of aeronautical tenant. 3.3.2 Most Frequently Discussed Grant Assurances Participants were asked to select all Grant Assurance issues or requirements that are most frequently involved in discussions of Grant Assurances out of a list of 16. A total of 12 participants responded to this question. Table R-8 lists the five identified most often by the participants.

28 ACRP Project 03-38 (FY 2015) Understanding FAA Grant Assurance Obligations Task 8 Research Report Chapter 3 Table R-8, Most Frequently Discussed Grant Assurances Rank*  Requirement or Issue Reponses Percentage of  Responders  1.  Use of Airport Revenue  (Grant Assurance  25)  10  83%  2.  Fee and Rental Structure (Grant Assurance 24)  10  83%  3.  9  75%  Reasonable  and Non‐discriminatory  Non‐  Commercial Aeronautical Lease Terms and  Conditions (Grant Assurance  22.a)  4.  Reasonable and Not Unjustly Discriminatory Minimum Standards (Grant Assurance 22.h)  8  67%  5.  Limitations on the Use of Airport Property  (Multiple  Assurances)  8  67%  * Participants were asked to select as many choices as applicable.  Therefore, the selection with the highest total  responses  is considered the most frequently  discussed, second highest total  responses, the  second most frequently discussed,  etc.  Source: AAAE Finance & Administration Committee Survey As shown, Grant Assurance 24, Fee and Rental Structure and Grant Assurance 25, Airport Revenues, were identified by 10 of the 12 participants as two of the most frequently discussed requirements. Not shown in a table are the Grant Assurance requirements or issues that are discussed least often. Three issues — Part 13 Administrative Procedures, Part 16 Administrative Procedures and Airport Proprietary Exclusive Rights — were identified by only one participant. 3.3.3 Grant Assurance Requirements/Issues That Are Hardest to Understand From a list of 16 Grant Assurance requirements or issues, participants were asked to identify all of those that were hard to understand. A total of 11 participants responded to this question. Table R-9 lists the four identified most often by the participants. After these four issues or requirements, multiple requirements or issues were identified by equal numbers of participants. Therefore, it is not possible to identify a single fifth requirement or issue.

29 ACRP Project 03-38 (FY 2015) Understanding FAA Grant Assurance Obligations Task 8 Research Report Chapter 3 Table R-9, Hard to Understand Grant Assurance Requirements/Issues Rank*  Requirement or Issue Reponses Percentage of  Responders  1.  5  45%  2.  5  45%  3.  4  36%  Non‐Commercial  Aeronautical  Lease  Terms  and Conditions (Grant Assurance 22.a)  Limitations on the Use of Airport Property (Multiple  Assurances)  Reasonable and Not Unjustly Discriminatory  Fees and Charges (Grant Assurances 22.a, c,  d)  4.  Airport Revenue  (Grant Assurance 25)  3  27%  * Participants were asked to select as many choices as applicable.  Therefore, the selection with the highest total responses is considered the hardest to understand,  second highest total responses, the second hardest, etc..  Multiple requirements or  issues were  identified by two responders.  Therefore  it is not possible to identify a  single  fifth hardest.  Source: AAAE Finance & Administration Committee Survey Four of the 15 requirements or issues were not identified as difficult by any participants — Grant Assurance 23, Exclusive Rights, Grant Assurance 22.g, Proprietary Exclusive Rights, Grant Assurance 19, Operation and Maintenance and requirements for grant-funded projects (multiple assurances). 3.3.4 Resources Used to Understand Grant Assurances Participants were asked to identify two resources they relied on most to understand Grant Assurance requirements from the six listed below.  Grant Assurance Text  FAA/DOT Policy Statements  Order 5190.6B  Compliance Advisory Circulars  Guidebooks or Desk References  Compliance Guidance Letters They were also given the option of identifying other resources. Eleven participants responded to this question. The Grant Assurance text was identified most frequently, with seven responses. FAA and DOT policy statements and guidance documents followed with six responses. 3.3.5 Experience with FAA Investigations Only one participant reported involvement in an FAA investigation of Grant Assurance compliance — an investigation under 14 CFR Part 16. The case was still pending when the participant completed the survey. The investigation involves the requirement for reasonable and non-discriminatory commercial

30 ACRP Project 03-38 (FY 2015) Understanding FAA Grant Assurance Obligations Task 8 Research Report Chapter 3 aeronautical lease terms and conditions (Grant Assurance 22.a). The participant reported fully understanding the Part 16 process. 3.3.6 Format of the Guidebook Participants were asked to select the format for the Guidebook that would be most useful from three options. They were also given the option to designate another format. 11 participants responded to this question. Figure R-5 summarizes the results. As shown, 82% of respondents (9 out of 11) recommended a combination of sequential discussion of the Grant Assurances and a Question and Answer (Q & A) format. No participant recommended exclusive use of the Q & A format. Source: AAAE Finance & Administration Committee Survey Figure R-5, Most Useful Format for Guidebook 3.3.7 Content of Summary Pages for Each Assurance Participants were asked to rate seven items for their importance to be incorporated into the summary pages for each Grant Assurance requirement. Twelve participants responded to this question. Table R- 10 summarizes the items identified as very important or extremely important by the respondents. A majority of respondents rated all seven items as very important or extremely important. Eleven out of 12 rated one item—cross-references to Order 5190.6B—at these levels.

31 ACRP Project 03-38 (FY 2015) Understanding FAA Grant Assurance Obligations Task 8 Research Report Chapter 3 Table R-10, Summary of Important Items to Include in Grant Assurance "Cover Pages" Rank*  Description of Item Number Rating  Very Important Number Rating  Extremely Important  Total  1.  Cross reference or link to sections of Order  5190.6A  9  2  11  2.  Listing of situations or issues in which Grant Assurance typically applies  7  3  10  Other grant assurances that typically apply  in common to each of those situations or  8  2  10  3.  issues  4.  Full text of the grant assurance  4  5  9  5.  Cross reference or link to other FAA guidance and policy documents  3  5  8  6.  Links to decisions applying the assurance, and finding no violation  3  5  8  7.  Links to  decisions applying the assurance and finding a violation  3  4  7  * Participants were asked to rank the importance of each item in a range from not at all important to  extremely important.  Rankings are based on the combined responses identifying individual items as very  important or extremely important.  Source: AAAE Finance & Administration Committee Survey 3.3.8 Most Important Grant Assurance Requirements/Issues for Special Emphasis in Guidebook Participants were asked to select five Grant Assurance requirements or issues for special emphasis in the Guidebook from the same list of 16 included in the question on hard to understand requirements or issues. Twelve participants responded. Table R-11 shows the five most important requirements or issues based on the combined responses. Grant Assurance 25, Airport Revenues, was identified most frequently (by nine out of the twelve participants). Four of the requirements — Grant Assurance 24, Fee and Rental Structure, Grant Assurance 25, Airport Revenue, Grant Assurance 22.h, Reasonable and Non- discriminatory Minimum Standards and limitations on the use of airport property were also identified as among the most frequently discussed Grant Assurance topics.

32 ACRP Project 03-38 (FY 2015) Understanding FAA Grant Assurance Obligations Task 8 Research Report Chapter 3 Table R-11, Most Important Grant Assurance Requirements/Issues for Special Emphasis in the Guidebook Combined  Rank  Requirement or Issue Total  Responses* Percentage of  Responders  1.  No. 25 Requirements for use of airport  revenue  9  75%  2.  No. 24 Requirement for self‐sustaining fee  and rental structure  8  67%  No. 22.a Reasonable and  not unjustly  3.  discriminatory access  for commercial  7  58%  aeronautical  users  No. 22.h Reasonable and non‐unjustly  4.  discriminatory  conditions  (minimum  6  50%  standards)  5.  Limitations on the use of airport property  6  50%  *Participants were asked to identify the  five most important requirements or issues for special emphasis.  Therefore the requirement or issue with the highest total score  is ranked most  important, and the requirement with the second highest score  is ranked second most important,  etc.  Source: AAAE Finance & Administration Committee Survey 3.3.9 Conclusions A majority of respondents reported frequent discussions of Grant Assurances with their governing bodies and other local officials and with aeronautical users other than air carriers. The requirements discussed most often were Grant Assurance 24, Fee and Rental Structure and Grant Assurance 25, Airport Revenues. These requirements were also identified as most important for special emphasis in the Guidebook. Only one respondent reported involvement in an FAA investigation of potential non-compliance with Grant Assurances. This result would not have been expected if compliance with Grant Assurance requirements were a significant challenge for most airports. Most respondents recommended that the Guidebook include a sequential discussion of the Assurances as well as questions and answers to help explain the Grant Assurances.