Permissible Uses of Airport Property and Revenue (2020)

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Permissible Uses of Airport Property and Revenue Copyright National Academy of Sciences. All rights reserved. ACRP LRD 40 25 permitted under FAA guidance (see above). The FAA pro- vides examples of this type of impermissible revenue use: “expenditure of $50,000 to sponsor a local film society’s annual film festival and contribution of $6,000 to a com- munity cultural heritage festival.”246 • Direct subsidies of air carriers are prohibited.247 However, an airport proprietor may waive or reduce fees during a promotional period not to exceed two years, as long as the proprietor offers it to any similarly situated airport user willing to provide the same type and level of new service consistent with the promotional offering, and as long as the costs of such a promotion are not shifted to other air carriers not participating in the promotional incentive program.248 III. METHODOLOGY A. Research Purpose, Scope and Method The research undertaken for this digest seeks to understand the boundaries of permissible use of airport revenue and prop- erty under federal law. The ultimate objective of the research was to provide practical guidance for determining permitted uses of airport revenue and property based on actual airport proprietor experiences. Accordingly, the research endeavored to answer the question: What are useful analytical frameworks for determining permissible uses of airport revenue and property in arising areas of airport development and spending? Given the open-ended nature of our inquiry, formulating a single hypothesis regarding successful use of airport revenue and property was inappropriate. Instead, we used a set of test- able propositions regarding the use of airport revenue and prop- erty: that federal laws regulating revenue use and property on airports are guiding decision-making factors in airport devel- opment; that, as a practical matter, airport proprietors face pressures to maximize development and use of airport prop- erty consistent with federal restrictions on airport revenue and property use; that sources and uses of airport revenue and prop- erty are varied among airports but may share similar character- istics; and that some resulting projects may highlight innovative thinking around airport revenue and property use, as well as industry-wide challenges to airport development. The research scope was further framed by our prior profes- sional experience regarding recent trends and specific issues concerning the use of airport revenue and property, where the presumptions above have been exhibited or raised. The researchers used their own experience representing airports to develop the specific topics of airport revenue use investigated in the research. At the same time, the research methods and tech- niques, particularly regarding primary research, were designed in a manner that allowed for identification of unanticipated topics of pertinent or innovative airport revenue and property use. 246 Id. § VI.B.11. 247 Id. § VI.B.12.; FAA Order No. 5190.6B § 15.13.m. 248 FAA Order No. 5190.6B § 15.13.n. port or aviation system purposes, with the exception of grand- fathered payments235 and certain payments to Native American tribes under pre-existing arrangements.236 b. FAA Guidance on Prohibited Uses As it has done with permissible uses of airport revenue, the FAA has provided guidance restating and elaborating the sorts of revenue uses that constitute unlawful revenue diversion. Under this guidance, impermissible uses of airport revenue include: • Payments that “exceed the fair and reasonable value of those services and facilities provided to the airport.” This includes both direct and indirect payments.237 • Payments made without using an acceptable cost allocation formula or that are not calculated consistently with other governmental units.238 • Use of airport revenue for general economic development.239 • Marketing or promotional activities unrelated to airport operations (e.g., marketing a particular local attraction, region or business that has no connection to promotion of the airport).240 • Loans to, or investment of, airport funds in a state or local agency at less than the prevailing rate of interest.241 • Use of airport land by an airport proprietor for non- aeronautical purposes where the proprietor charges itself less than fair rental or market value, 242 or for aeronauti- cal purposes (e.g., a proprietor-owned, fixed-base operator) where the proprietor provides rent-free or charges itself a nominal rate.243 However, a proprietor may use airport property in this manner to the extent required under fed- eral requirements for airports to be self-sustaining.244 • Impact fees assessed by a government, other than those that go toward covering a cost necessitated to undertake a covered airport development cost.245 • Expenditures to support community activities or participa- tion in community events, except in specific circumstances 235 See supra Section II.C.4. 236 Department of Transportation and Related Agencies Appropriation Act of 1998, Pub. L. No. 105-66, § 340, 111 Stat. 1425, 1448-49 (1997) (codified at 49 U.S.C. § 47107 note). 237 Revenue Use Policy, Feb. 1999, 64 Fed. Reg. 7696, 7720 § VI.B.1. (Feb. 16, 1999). 238 Id. § VI.B.2. 239 Id. § VI.B.3.; FAA Order No. 5190.6B, FAA Airport Compliance Manual, § 15.13.d (2009). 240 Revenue Use Policy, Feb. 1999, 64 Fed. Reg. at 7720 § VI.B.4.; FAA Order No. 5190.6B § 15.13.e.; ASIP Guidebook, supra note 222, at 3. 241 Revenue Use Policy, Feb. 1999, 64 Fed. Reg. at 7720 § VI.B.7. 242 Id. § VI.B.8; FAA Order No. 5190.6B § 15.13.j. 243 Revenue Use Policy, Feb. 1999, 64 Fed. Reg. at 7720 § VI.B.9.; FAA Order No. 5190.6B § 15.13.i. 244 Revenue Use Policy, Feb. 1999, 64 Fed. Reg. at 7720 § VII.B.3.; FAA Order No. 5190.6B §15.13.i. 245 Revenue Use Policy, Feb. 1999, 64 Fed. Reg. at 7720 § VI.B.10.

Permissible Uses of Airport Property and Revenue Copyright National Academy of Sciences. All rights reserved. 26 ACRP LRD 40 5190.6B, Part 16 decisions and case law using standard data- bases such as Westlaw and Lexis) were supplemented by sources of airport law such as FAA Advisory Circulars, FAA Policy Statements and FAA Standard Operating Procedures; informal guidance documents published on the FAA website; and FAA correspondence from its headquarters to local offices and from the FAA to airport proprietors. Where such sources are available primarily on the internet, sources were cited to the URL. Review of existing research involved a review of prior articles and papers published by various entities, including the federal government, Transportation Research Board and academic journals and publications. We also reviewed our own previous internal research and analysis conducted at the behest of our clients, synthesizing and presenting such research strictly in ac- cordance with our legal ethical duties, including attorney-client privilege. We collected primary research data through nine semi- structured interviews with officials representing airport propri- etors operating large, medium and small airports. The number of interviews conducted was determined by balancing the need for obtaining a sufficiently wide and representative sampling of different types of airport proprietor experiences with limita- tions on resources and the thoroughness required to adequately under stand and analyze the selected cases. The sample of air- ports was selected to reflect a diversity in airport size, geographic location, governance, administration and other factors to reflect varied experiences with the use of airport revenue and property that would provide useful insights for other airport proprietors. We selected interview participants based on the researchers’ (and their firm’s) extensive experience representing airport pro- prietors in development projects and their knowledge of, and contacts in, the airport industry. The selection structure and criteria were discussed with and approved by the research over- sight panel ahead of data collection. To standardize the data collected through interviews, we provided a consistent set of questions to each interviewee in ad- vance. However, to capture the unique and qualitative nature of our inquiry, we used a semi-structured interview format that permitted interview participants to deviate from the questions to address topics relevant to the scope and goals of the research. A copy of the questions used is attached at Appendix A. To help ensure participation and accurate information, all inter viewees were guaranteed confidentiality and informed that all proprietor or interviewee information would be de- identified. C. Discussion of Method of Analysis and Presentation of Results Analysis of the resulting research and data required follow- ing airport proprietor strategies and steps for airport revenue and property use and comparing them with legal prescriptions and examples provided in federal statutes, regulations and FAA guidance. The analysis focused on understanding the nexus between airport revenue and property and legal mechanisms providing opportunities to use these resources for airport devel- opment, operation and maintenance. The research subject, purpose and scope lent themselves to a qualitative mixed-methods research approach integrating sys- tematic review249 and analysis of legal frameworks and existing legal case study research, as well as primary data collection of case studies in the form of qualitative interviews. The emphasis on case studies reflected the strengths of the case study method, in which a single or small number of cases are investigated to better understand and explain how airport proprietors are con- fronting and solving problems involving revenue and property use.250 Case studies “aim to produce an invaluable and deep understanding … resulting in new learning about real-world behavior and its meaning”251 and, were appropriate here, where “examining the context and other complex conditions related to the case(s) being studied are integral to understanding the case(s).”252 To clarify boundaries of the research, our review of existing materials and collection of new data were framed by the re- search question and priorities in research purpose. Accordingly, we generally defined cases as particular development projects or activities in which airport proprietors potentially had the op- portunity to use airport revenue or use airport property. Review of existing research focused on cases which represented key issues or innovations useful to addressing the research purpose. To verify and triangulate issues and innovations raised in the case studies and develop potential new cases, interviews with a more representative sample of airport proprietors also were conducted. Based on the research purpose and scope, as well as the selected method of investigation, the research team developed a protocol with high-level input from the research review panel. Details of the research protocol—including design, data collec- tion techniques, analysis and reporting—are provided below. B. Data Collection Method and Techniques Data collection techniques included desktop research of statutes, regulations, guidance, contracts and other legal docu- ments; publicly available information regarding particular air- port development projects; and interviews with airport propri- etor representatives. Including multiple sources of data provided further opportunity to triangulate the information collected. Legal research was conducted using standard legal research techniques and included reference to codes, regulations and of- ficial guidance, as well as journals, legal databases and online resources. Review of traditional sources of legal authority (i.e., United States Code, Code of Federal Regulations, FAA Order 249 See Jens Newig & Oliver Fritsch, Paper Presentation at the American Political Science Association 2009 Annual Meeting in Toronto: The Case Survey Method and Applications in Political Science (Sept. 3-6, 2009), https://www.researchgate.net/publication/228162937_ The_Case_Survey_Method_and_Applications_in_Political_Science (providing background on the systematic review method of analysis). 250 Robert K. Yin, Applications of Case Study Research 5 (3d ed. 2012). 251 Id. at 4. 252 Id.