GAA 2014 Spring Workshop

1. GAA2014 Spring Workshop Federal Update Georgia Airports Association Atlanta Airports District Office March 13, 2014

2. Federal Update Georgia Block Grant FY 2014 AIP Program FY 2015 AIP Program Georgia AIP Funding Odds & Ends Economic Development at Obligated Airports

3. Georgia Block Grant ATL-ADO – Issues grants to Primary Airports (ABY, AGS, ATL, BQK, CSG, SAV, VLD) and the Georgia Block Grant to GDOT. We are their service point for all AIP issues. GDOT – Issues sub-grants to all General Aviation Airports and are their service point for all AIP issues.

4. FY 2014 AIP Program Update H.R. 3547 - $3.35B obligation limit ($3.194B for grants) Prohibits funds from being spent on baggage system modifications for EDS machine installation. Provides for 95% Federal share for FY14 small airport construction projects that are a phase of a construction project begun in FY11.

5. FY 2014 AIP Program Update Provides for 95% Federal share for Essential Air Svc. (EAS) and Economically Distressed Areas (EDA). Provides minimum amount of NPE funds of $1M for airports serving large air carriers with at least 10,000 annual enplanements (scheduled or unscheduled) (Sec. 47114(c), "large carrier provision")

6. FY 2014 AIP Program Schedule All Airports Submitted Their Annual CIP’s in January 2013 ADO Established 2014 AIP Program in April 2013 ADO PM’s currently conducting Pre-Grant Conferences Work with ADO PM on Bidding schedules First Grants – Approx. May 15th

7. FY 2015 AIP Program Schedule CIP Call Letter Issued in October 2013 (Jan. 1 submittal) ADO PM’s are Currently Scrubbing April – Selection of Projects & Disc. Program We Continue to Encourage Prior-year Design

8. Georgia AIP Funding million

9. Odds & Ends New AIP Handbook (FAA Order 5100.38) • Draft is currently available – www.faa.gov/airports/aip/aip_handbook Airports Division SOP’s (23 total) • Exhibit “A”, ALP, Construction Safety Phasing Plans AC 150/5300-13A, Change 1, 2/26/14 • Primarily includes updates to the standards for Taxiway Fillet Design • New Approach and Departure Reference Code (APRC and DPRC) designations replace Runway Reference Code (RRC).

10. Odds & Ends ARP Digitization • Electronic Docs A&E, and Planning Consultant Services For Airport Grant Projects, AC 150/5100-14 • Update underway SAMS/DUNS/CCR • Keep up to date

11. Economic Development at Obligated Airports Self Sustainability Revenue Diversion Land Releases Review of Non-Aeronautical Leases RPZ Policy Planning and Environmental Requirements Ensuring Safe Approaches at Your Airport Development Proposal Considerations

12. Grant Assurance 24 – Fee and Rental Structure Self-sustainability Georgia Airports Association Atlanta Airports District Office March 13, 2014

13. Grant Assurance 24 - Fee and Rental Structure • It will maintain a fee and rental structure for the facilities and services at the airport which will make the airport as self-sustaining as possible under the circumstances existing at the particular airport, taking into account such factors as the volume of traffic and economy of collection.

14. Self Sustainability Legislative History • Section 511(a)(9) of the Airport and Airway Improvement Act of 1982. • Codified in 49 USC § 47107(a)(13) • Section 112(a) of the Federal Aviation Administration Authorization Act of 1994. • Amended 49 U.S.C. § 47107(l) to require FAA’s Policy and Procedures Concerning the Use of Airport Revenues to take into account whether sponsors – when entering into new or revised agreements otherwise establishing rates, charges, and fees – have undertaken reasonable efforts to be self sustaining in accordance with 49 U.S.C. § 47107(a)(13).

15. Self-sustainability Self-sustaining Principle • Each Federally assisted airport owner/operator is required by statue and grant assurance to have an airport fee and rental structure that will make the airport as self-sustaining as possible under the particular airport circumstances, in order to minimize the airport’s reliance on Federal funds and local tax revenues. • Recognizes that individual airports may differ in their abilities to be self-sustaining. • Maintains the utility of the Federal investment in the airport.

16. Self-sustainability Airport Circumstances • Recognizes that market conditions at some airports may not permit the sponsor to establish fee’s sufficiently high enough to recover aeronautical costs and sufficiently low enough to attract and retain commercial aeronautical services. • Sponsor’s decision to charge rates that are below those needed to achieve self-sustainability in order to assure that services are provided to the public is not inherently inconsistent with the federal obligation to make the airport as self-sustaining aspossible given its particular circumstances.

17. Self-sustainability Airport Circumstances –Aeronautical Rates Potential GA 24 Conflict Potential GA 22(a) Conflict Cost Recovery Attraction Potential GA 22(a) Conflict Potential GA 24 Conflict

18. Self-sustainability - Aeronautical • Rates and Charges for the use of the airfield generally may not exceed the airports capital and operating costs of providing the airfield. • Aeronautical fees for landside or non-movement area airfield facilities (e.g. hangars and aviation offices) may be at a fair market rate, but are not required to be higher than a level that reflects the cost of services and facilities. (i.e. somewhere between cost and Fair Market Value), • The FAA will not ordinarily investigate the reasonableness of a general aviation airport’s fees absent evidence of a progressive accumulation of surplus aeronautical revenues.

19. Self-sustainability – Non-aeronautical • The grant assurances do not prohibit an airport owner from using airport property for non-aeronautical revenue production. • (Some Surplus Property Deed Restrictions and Sec. 16/23 conveyances do prohibit non-aeronautical use) • The prime obligation of the owner of a federally assisted airport is to provide a facility to serve the public’s interest in aviation. • This overrides the use of airport property for non-aeronautical purposes. • Surplus non-aeronautical revenues can be used to subsidize aeronautical costs of the airport. (Not vice versa!!!)

20. Self-sustainability – Non-aeronautical • For non-aeronautical uses the FAA requires: • The airport receive Fair Market Value (FMV) rents.

21. What is Fair Market Value (FMV)? The cash price that a property would most likely sell for in the market, assuming that it has a reasonable time for exposure on that market and assuming it is offered for sale by a knowledgeable owner - the seller- who is willing but not obligated to sell to a knowledgeable purchaser who is willing but not obligated to buy. To be at FMV, the Property Sale/Lease Must Be: • Arms Length Transaction (Knowledgeable Buyer and Seller are independent of one another, no undue influence exerted by either party or by any other source). • Adequately exposed “For Sale/Lease” on the market (all terms and conditions disclosed) • For the Real Property Only. No side deals for other property, loans, personal property, other debts between the parties, etc.. • For Cash Payment or Equivalent and For Clear Title to the Land. An Appraiser Analyzes and Documents the Property and Market Sale/Lease Conditions to Appraise the FMV of a Property

22. Self-sustainability – Non-aeronautical • Fair Market Value (FMV) • FMV appraisal (typically required for long term non-aero leases and significant non-aero use/development) • FAA Advisory Circular (AC) 150/5100-17 CHG 6, Land Acquisition and Relocation Assistance for Airport Improvement Program (AIP) Assisted Projects, • Uniform Standards of Professional Appraisal Practice (USPAP), • Uniform Appraisal Standards for Federal Land Acquisition (UASFLA). • Restricted Use Appraisals are not acceptable!! • FMV lease rate is determined by multiplying the capitalization rate by the appraised fee simple FMV. • Capitalization rates typically range from 6-12%

23. Rate Structures 12% Capitalization Rate ↑ Non-Aero Leases ↓ Fair Market Value (FMV) –Non Aeronautical Rates ↑ 6% Capitalization Rate Aeronautical Rates Nominal Value

24. Self-sustainability Most Common Issues: • Failure to obtain fair market rental value for non-aeronautical uses of airport property, • No appraisals/Restricted Use appraisals • Aeronautical Revenue Surplus • Cost-freeuse of airport land by the airport owner (normally local city or county) (Below FMV use by the airport owner could also be considered revenue diversion)

25. Resources FAA’s Airport Compliance Program http://www.faa.gov/airports/airport_compliance/ FAA Order 5190.6B, Chapters 17 & 18 Grant Assurances FAA’s Policy Regarding Airport Rates and Charges (September 10, 2013) FAA’s Policy and Procedures Concerning the Use of Airport Revenue (February 16, 1999)

26. FAA Southern Region Chuck Garrison Airports Program Manager 404-305-6723

27. Grant Assurance 25 – Airport Revenues Permitted and Prohibited Uses of Airport Revenues Georgia Airports Association Atlanta Airports District Office March 13, 2014

28. Grant Assurance 25: Airport Revenues • All revenues generated by the airport and any local taxes on aviation fuel established after December 30, 1987, will be expended by it for the capital or operating costs of the airport; the local airport system; or other local facilities which are owned or operated by the owner or operator of the airport and which are directly and substantially related to the actual air transportation of passengers or property; or for noise mitigation purposes on or off the airport.

29. Federal Law and Policy Airport & Airway Improvement Program of 1982 Airport & Airway Safety & Capacity Expansion Act of 1987 FAA Authorization of 1994 FAA Reauthorization Act of 1996 FAA Modernization & Reform Act of 2012

30. Federal Law and Policy Codified at 49 U.S.C. § 47107(b) and § 47133 FAA’s Policy and Procedures Concerning the Use of Airport Revenue (February 16, 1999) Grant Assurance 25 FAA Order 5190.6B, Airport Compliance Manual, Chapters 15 & 16

31. Rate Structures 12% Capitalization Rate ↑ Non-Aero Leases ↓ Fair Market Value (FMV) –Non Aeronautical Rates ↑ 6% Capitalization Rate Aeronautical Rates Nominal Value

32. What is Airport Revenue? Revenues paid to or due to the airport for the use of airport property (fees, charges, rents, etc). Revenue from the sale of property and resources (including mineral, natural, or agricultural products or water taken from the airport).*** Revenue from state and local taxes on aviation fuel (except taxes in effect on December 30, 1987).

33. An airport may use its revenues for the capital and operating costs of the airport, the local airport system, or other local facilities owned and operated by the airport owner or operator and directly and substantially related to the air transportation of passengers or property. Permitted Uses of Airport Revenue Airport employee salaries Utilities Marketing the airport Local AIP match Insurance Lobbying and attorneys fees Repayment of the sponsor*** Costs incurred by government officials*** General government costs***

34. Direct or indirect payments which exceed the value of services/goods received by the airport. General economic development, marketing, and promotional activities unrelated to the airport. Payments in lieu of taxes, impact fees, or other assessments that exceed the value of services provided. Payments to compensate nonsponsoring governmental bodies for lost tax revenues. Prohibited Use of Airport Revenue

35. Prohibited Use of Airport Revenue Loans to or investment of airport funds in a state or local agency at less than the prevailing rate of interest. Land rental to or use of land by the sponsor for nonaeronautical purposes at less than FMV. Use of land by the sponsor for aeronautical purposes rent-free or for nominal value.*** Community activities/events for community purposes. Direct subsidy to air carrier operations

36. Most Common Violations: Cost allocation plans which overcharge the airport and subsidize other municipal operations. Not charging FMV for nonaeronautical activities. Using airport property for other municipal activities (animal shelters, firing ranges, jails, vehicle or equipment storage, etc.) without compensating the airport at FMV. Poorly structured air carrier incentive programs which inadvertently subsidize air carriers. Selling airport land and not compensating the airport.

37. Permitted v. Prohibited 100% of the salaries & benefits for full time, dedicated airport employees 100% of the salaries & benefits for city employees who spend only 25% of their time on airport issues

38. Permitted v. Prohibited Sponsor charges a nominal lease rate to a nonprofit aviation museum on the airport. Sponsor charges the Air National Guard unit a nominal rate for its leasehold. Sponsor charges itself a nominal lease rate to use airport land for its emergency operations call center. Sponsor enters into a $1 per year lease with the county for a golf course.

39. Permitted v. Prohibited The county’s HR department does all hiring and personnel actions for the airport, so the airport pays an amount porportionate to its percentage of airport employees. The county’s HR department provides no services to the airport, but charges the airport 10% of their costs as an administrative fee.

40. Permitted v. Prohibited Costs associated with sending members of the airport commission to DC to meet with the FAA and attend a AAAE conference. Lobbying fees for an AIP project. Attorney fees for a lawsuit filed against a project at the airport. Costs associated with sending members of the airport commission to China to promote trade. Lobbying fees for a highway project. Attorney fees for a lawsuit filed against the sanitation department

41. Permitted v. Prohibited Membership in the local chamber of commerce. Contribution to a golf tournament sponsored by the “Friends of the Airport” committee. Funding an airport operator’s float that has no reference to the airport in a New Year’s Day Parade. The airport contributes $50,000 for the city’s film festival.

42. Permitted v. Prohibited Marketing or promotional costs which promote: • the airport • airport facilities and services • services provided by airport vendors • new service and competition at the airport Destination marketing General tourism marketing

43. Permitted v. Prohibited

44. Permitted v. Prohibited The airport develops a one-year air carrier incentive program which waives landing fees to air carriers providing new service to a specific destination identified by the airport. The sponsor uses parking revenues to pay for the incentive. The airport uses landing fees to pay a discount carrier to provide service to the airport.

45. Airport revenueMAYbe used to repay or reimburse an airport sponsor’s contribution to the airport if the sponsor makes the request for reimbursement within six (6) years of the date on which it made the contribution. A sponsor may only claim interest from the date the FAA determines the sponsor is entitled to interest. Repayment of Sponsor Contributed Funds If the contribution is structured and documented as a loan at the timeit is made, the FAA may permit repayment over a longer period, with interest.

46. Community Use of Airport Property • The property is not needed for an aeronautical purpose; • The use enhances community relations; • Does not adversely affect the capacity, security, safety, or operations at the airport; • The property involved would not reasonably be expected to produce more than de minimis revenue; • Community use does not preclude reuse of the property for airport purposes; and • Airport revenue is not used to support the capital or operating costs associated with the community use. (All conditions must be met)

47. Transit Projects An airport sponsor may charge less than FMV for public transit terminals, right-of-way, and related facilities if: • The transit system is publically owned and operated; AND • The facilities are directly and substantially related to the air transportation of passengers or property.

48. Ground Access Projects A sponsor may use airport revenue to pay for the airport’s share of a ground access project if: • The project qualifies as an integral part of an airport capital project; AND • If the project is owned or operated by the sponsor and is directly and substantially related to the air transportation of passengers and property.

49. Private Transit Systems Generally – charged FMV as a nonaeronautical use Rarely – in cases where publicly-owned transit services are extremely limited and a private transit service provides the primary source of transportation to the public, making land available at less than FMV may be ok.

50. Lawful Diversion of Airport Revenue Grandfathered obligations Airport privatization program (49 U.S.C. § 47134) Certain sale proceeds from the sale of a privately owned airport to a public sponsor Certain revenue derived from or generated by mineral extraction, production, lease, etc.