A Federal Grant Assurance Primer Continued from page 39 there are complaints. The FAA made this clear most recently in the guidance it published in December 2017.6 Determining what is “fair and reasonable” is a chal- lenge because airports are unique properties with little in the way of direct comparable properties. However, comparisons can be made between airports with similar numbers of operations, the number of based and transient operators, the proximity to desirable destinations and the level of facilities and services available to operators. AIRPORT REVENUES (GRANT ASSURANCE #25) All revenue generated by the airport must be spent on the capital and operating costs of the airport. Airport revenue includes revenue of all kinds—whether from aeronautical or non-aeronautical users. It includes fees, rents, charges and payments from aeronautical users, tenants and busi- nesses on the airport; revenue from sponsor-owned property off airport; all revenue from non-aeronautical activities; revenue from the sale of mineral rights and agricultural leases; proceeds from the disposal of air- port property; and state or local taxes on aviation fuel. The benefit to FBOs of grant assurance 25 is that it ensures that fees and charges paid by FBOs and their customers are not used for non-airport purposes. Without this grant assurance, FBOs and their customers could be paying more than necessary. If airport revenue is used for non-airport projects, it means that fees and charges paid by aeronautical users and FBOs have gone else- where, and have not supported the airport’s operations and improvement projects. Using airport revenues for non-airport purposes is called “revenue diversion.” Federal law prohibits airport sponsors from using airport revenues for non-airport purposes. Airports may not divert airport revenues to pay for non-airport-related activities such roadway repair, fire and policing costs that are not airport related; non-airport-related public relations activities; building permit fees for inspection services that were either not properly documented or were duplicative.7 6 Q&As – FBO Industry Consolidation and Pricing Practices, December 7, 2017, available at https://www.faa.gov/airports/airport_com- pliance/media/QAs-FBO-Consolidation-Pricing-final.pdf. 7 Office of Inspector General Audit Report, Diversion of Airport Revenue Dade County Aviation Department, Report R4-FA-7-035, June 25, 1997. Other examples of prohibited purposes are: loaning airport funds to the general fund; purchasing land that is unusable for airport purposes; paying for administrative overhead expenses in excess of the benefit to the airport; and paying for auditing costs to cure revenue diversion violations.8 Grant assurances 19, 22, 24 and 25 have a big effect on the relationship between an airport and FBOs and businesses. There are others that are important as well, depending on the particular grants, types of projects and the operating history of the airport. When there is a healthy business climate and the airport sponsor under- stands its contractual obligations, the federal funding of airport projects is more likely to be secure and to be used appropriately for efficient operations and manage- ment. But, if the airport sponsor is not fulfilling these obligations, then it is often the FBO or other airport- based businesses that are directly affected and are first aware that something is amiss. For these businesses, it is important to understand the principles of the grant assurance and ask reasonable questions to protect their business interests and the use of federal funding. Shelley A. Ewalt, Partner, is based in Princeton, New Jersey. Shelley’s practice focuses on aviation and airport law, and a comprehensive range of transportation and avia- tion regulatory compliance issues. Represented clients include FBOs, repair stations, flight departments, charter and scheduled air carriers, and aviation service support providers. Her career in aviation spans over 25 years, with experience ranging from front-line MRO operations and management roles to legal roles. She is an active general aviation pilot with a commercial pilot’s license with multi-engine and instrument ratings. Shelley can be reached at [email protected] or +1.703.399.6078. 8 Office of Inspector General Audit Report, Diversion of Airport Revenue Augusta-Richmond County Commission, Report AV-1998-093, March 12, 1998. Aviation Business Journal | 2nd Quarter 2018 41
