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Guidebook for Developing and Leasing Airport Property (2011)

Chapter: Chapter 3 - Airport Owner/Sponsor Role

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Suggested Citation:"Chapter 3 - Airport Owner/Sponsor Role." National Academies of Sciences, Engineering, and Medicine. 2011. Guidebook for Developing and Leasing Airport Property. Washington, DC: The National Academies Press. doi: 10.17226/14468.
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Suggested Citation:"Chapter 3 - Airport Owner/Sponsor Role." National Academies of Sciences, Engineering, and Medicine. 2011. Guidebook for Developing and Leasing Airport Property. Washington, DC: The National Academies Press. doi: 10.17226/14468.
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Suggested Citation:"Chapter 3 - Airport Owner/Sponsor Role." National Academies of Sciences, Engineering, and Medicine. 2011. Guidebook for Developing and Leasing Airport Property. Washington, DC: The National Academies Press. doi: 10.17226/14468.
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Suggested Citation:"Chapter 3 - Airport Owner/Sponsor Role." National Academies of Sciences, Engineering, and Medicine. 2011. Guidebook for Developing and Leasing Airport Property. Washington, DC: The National Academies Press. doi: 10.17226/14468.
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Suggested Citation:"Chapter 3 - Airport Owner/Sponsor Role." National Academies of Sciences, Engineering, and Medicine. 2011. Guidebook for Developing and Leasing Airport Property. Washington, DC: The National Academies Press. doi: 10.17226/14468.
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Suggested Citation:"Chapter 3 - Airport Owner/Sponsor Role." National Academies of Sciences, Engineering, and Medicine. 2011. Guidebook for Developing and Leasing Airport Property. Washington, DC: The National Academies Press. doi: 10.17226/14468.
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Suggested Citation:"Chapter 3 - Airport Owner/Sponsor Role." National Academies of Sciences, Engineering, and Medicine. 2011. Guidebook for Developing and Leasing Airport Property. Washington, DC: The National Academies Press. doi: 10.17226/14468.
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Suggested Citation:"Chapter 3 - Airport Owner/Sponsor Role." National Academies of Sciences, Engineering, and Medicine. 2011. Guidebook for Developing and Leasing Airport Property. Washington, DC: The National Academies Press. doi: 10.17226/14468.
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Suggested Citation:"Chapter 3 - Airport Owner/Sponsor Role." National Academies of Sciences, Engineering, and Medicine. 2011. Guidebook for Developing and Leasing Airport Property. Washington, DC: The National Academies Press. doi: 10.17226/14468.
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Suggested Citation:"Chapter 3 - Airport Owner/Sponsor Role." National Academies of Sciences, Engineering, and Medicine. 2011. Guidebook for Developing and Leasing Airport Property. Washington, DC: The National Academies Press. doi: 10.17226/14468.
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Suggested Citation:"Chapter 3 - Airport Owner/Sponsor Role." National Academies of Sciences, Engineering, and Medicine. 2011. Guidebook for Developing and Leasing Airport Property. Washington, DC: The National Academies Press. doi: 10.17226/14468.
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Suggested Citation:"Chapter 3 - Airport Owner/Sponsor Role." National Academies of Sciences, Engineering, and Medicine. 2011. Guidebook for Developing and Leasing Airport Property. Washington, DC: The National Academies Press. doi: 10.17226/14468.
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Suggested Citation:"Chapter 3 - Airport Owner/Sponsor Role." National Academies of Sciences, Engineering, and Medicine. 2011. Guidebook for Developing and Leasing Airport Property. Washington, DC: The National Academies Press. doi: 10.17226/14468.
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Suggested Citation:"Chapter 3 - Airport Owner/Sponsor Role." National Academies of Sciences, Engineering, and Medicine. 2011. Guidebook for Developing and Leasing Airport Property. Washington, DC: The National Academies Press. doi: 10.17226/14468.
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Suggested Citation:"Chapter 3 - Airport Owner/Sponsor Role." National Academies of Sciences, Engineering, and Medicine. 2011. Guidebook for Developing and Leasing Airport Property. Washington, DC: The National Academies Press. doi: 10.17226/14468.
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Suggested Citation:"Chapter 3 - Airport Owner/Sponsor Role." National Academies of Sciences, Engineering, and Medicine. 2011. Guidebook for Developing and Leasing Airport Property. Washington, DC: The National Academies Press. doi: 10.17226/14468.
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Suggested Citation:"Chapter 3 - Airport Owner/Sponsor Role." National Academies of Sciences, Engineering, and Medicine. 2011. Guidebook for Developing and Leasing Airport Property. Washington, DC: The National Academies Press. doi: 10.17226/14468.
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Suggested Citation:"Chapter 3 - Airport Owner/Sponsor Role." National Academies of Sciences, Engineering, and Medicine. 2011. Guidebook for Developing and Leasing Airport Property. Washington, DC: The National Academies Press. doi: 10.17226/14468.
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Suggested Citation:"Chapter 3 - Airport Owner/Sponsor Role." National Academies of Sciences, Engineering, and Medicine. 2011. Guidebook for Developing and Leasing Airport Property. Washington, DC: The National Academies Press. doi: 10.17226/14468.
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Below is the uncorrected machine-read text of this chapter, intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text of each book. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.

30 Airport owners, or sponsors, as referred to by the FAA when describing airport owners, are the driving force behind most individual development projects. As the land owner, the airport sponsor establishes and sets the direction for planning related to airport development. In addition to setting the stage for airport development projects, it is important that the airport sponsor strike an appropriate balance between maximizing revenue through development and meeting the demands of the airport users and surrounding community. It is also important to remember that the primary role of the airport is to serve the current and projected aviation demands of the airport’s users and surrounding community first; ancillary and nonaviation related development, no matter how financially attractive to the airport sponsor or surrounding commu- nity, are secondary considerations. Since the airport performs an important role in the support and development of a given region’s population and economic base, and provides core services to its users, the airport, and its primary function of serving aviation demand, should always be consid- ered its most important asset to the local community and the surrounding region as a whole. Perhaps one of the most important roles of the airport sponsor is the coordination of appli- cable stakeholders beyond just the lessor-lessee paradigm; these stakeholders range from local, state, and federal agencies, to local community and business organizations. Stakeholders can bring valuable resources to a given project/lease agreement, and, conversely, can also present obstacles if not brought into the process early. Identification and engagement of these entities should occur at the beginning of any potential project, and their input, whether positive or neg- ative, needs to be duly considered throughout the planning and development process. Finally, the negotiation process itself will open the door to subjectivity. Therefore, any guide- line or policy must be flexible enough to accommodate the varied needs of the potential tenants, and to provide the airport sponsor with the ability to negotiate and adjust terms as needed. Flex- ibility and give-and-take from both sides of the negotiating table is often the key to the success- ful negotiation. Throughout the negotiation process, the airport sponsor should consider simple guidelines when dealing with the potential tenant. The following guidelines are excerpts from FAA/ACC Best Practices: Improving the Quality of Airport Projects (FAA/ACC, 2008): • Listen actively to the extent possible, try to understand the perspective of the speaker, ask clarifying ques- tions, and repeat back to the speaker what you think was said. • Show mutual professional respect. • Engage in early, ongoing, and open communication. • Be forthright and realistic with expectations. • Be accessible. • Show patience and flexibility when discussing differences. • Practice timely communication. • Meet professional and project commitments. C H A P T E R 3 Airport Owner/Sponsor Role

The following sections of this chapter will examine in detail the key responsibilities of the air- port sponsor when planning and evaluating potential airport development projects and when negotiating their associated lease agreements. The tools, policy, and considerations addressed in these sections are designed, when implemented, to provide the airport sponsor with the foun- dation on which to evaluate the financial, operational, and regulatory desirability of individual airport development projects. 3.1 Airport Vision In order to take full advantage of development opportunities in a manner that is beneficial to both the airport sponsor and the tenant, it is necessary to understand the potential of the airport in relation to the surrounding community. This is an ongoing and often evolving process that includes the following steps: • Establishing an Airport Master Plan or other visioning tool; • Aligning airport and community goals; • Setting a leasing policy; • Providing flexibility; and • Coordinating with local, state, and federal agencies, when appropriate. There are several tools that the airport sponsor has at his disposal that will assist in defining the airport’s market niche, what development is realistically possible, and the anticipated demand that will drive future airport use. These tools, when used in conjunction, will provide the airport sponsor with a road map that guides future growth and establishes guidelines and benchmarks necessary to ensure the financial viability of the airport. 3.1.1 Airport Master Plan Many of the airports that have found success with leasing and developing airport property began with a vision or a strategy that served as an implementation plan for successful develop- ment. The Airport Master Plan is the predominant vehicle for such a vision or strategy, method- ically analyzing demand, forecast activity, tenant base, business clusters, utility infrastructure, environmental considerations, and airfield attributes to describe how land might be leased and developed for special-use aeronautical and nonaeronautical tenants/users. An Airport Master Plan is a comprehensive study of an airport or system of airports. It pre- scribes short-, medium-, and long-term development plans to meet future airport demand, and it puts forward recommendations for the safe, efficient, and economical development of an air- port to meet the needs of the community it serves. The plan should be thoughtful, well coordi- nated, practical, and cost effective, and it should include a realistic assessment of needs and resources consistent with the established goals and objectives. The FAA offers guidance for Air- port Master Plans in Advisory Circular (AC) 150/5070-6B. The master planning process often serves as a consensus-building forum for community leadership, stakeholders, corporate citi- zens, and members of the airport community to go through a vetting process that ultimately yields a realistic vision for the future. The vision or strategy should also consider priority of development. The Airport Layout Plan (ALP) is an important component of the Airport Master Plan and translates the goals and objectives of the planning effort into tangible airport attributes. Run- ways, taxiways, ramps, approaches, and other airport attributes are laid out, showing both cur- rent and ultimate geometries. Meteorological data are also included to match runway alignments and wind coverage to existing and proposed aeronautical facilities, and the parcels of land that Airport Owner/Sponsor Role 31

make up the airport are shown, along with the history of acquisition, to provide insight as to how the airport developed over time. From an airport leasing and land development perspective, the ALP identifies both existing air- port development and planned airport development. The ALP may be very detailed in some areas, such as showing additional rows of T-hangars precisely laid out to function with existing ramp and hangar facilities, or it may be purposely vague in other areas, such as preserving a sizable parcel for a future FBO, ensuring the land area is adequate to meet the minimum standards requirements. While the Airport Master Plan may be updated every 7 to 8 years, or longer, the ALP is mandated by FAA Grant Assurance 29 to be up to date at all times. As the capital improvement plan described in the Master Plan is implemented, and more often than not, modified as time goes on, the ALP is updated to show the improvements and airport development. As new parcels of land are acquired, buildings are constructed, and aeronautical facilities are improved over time, the ALP serves as a living archive if updated appropriately. In some cases, airports take visioning and strategic planning to a broader scale, deploying strate- gic plans or business plans that consider the greater region, relationship between modes of trans- portation, and transportation infrastructure beyond aviation. It is important to look at business activities and clusters within the community and region that might provide synergy to airport development and analyze opportunities that exist because of proximity of the airport and those business activities. These macro studies can provide a broader vision and a more refined strategy for leasing and developing airport property, but they too must tie back to and be consistent with the Airport Master Plan and the Airport Layout Plan. All of these visioning strategies strive to identify opportunities and niches for the airport to pur- sue, as well as prioritization. Some opportunities are quite obvious; others may be more dependent on the business climate in the community, and some opportunities may come completely un- expectedly. A master or strategic plan should be flexible enough to accommodate creative and emerging opportunities. An airport might want a specific service or type of development because it will spur other activities, but market demand will ultimately drive airport development. Exam- ples of airport development that might be desired and described within the Airport Master Plan include FBOs, hangars, and aircraft service providers. Beyond the pure aeronautical developments described within a Master Plan are examples such as express cargo, which can spur nonaeronauti- cal development such as freight forwarding, trucking, third-party logistics, and other activities that directly involve local and regional business and commerce. In short, focusing on key development that is consistent with a strategy or a vision may take priority over other types of development because of the opportunity for synergy that might exist. 3.1.2 Infrastructure Inventory Analysis It is important for airport stakeholders to be aware of the airport’s current infrastructure. Up-to-date records—maintained by the airport and made available to stakeholders—can help stakeholders identify problems and potential shortcomings. Keeping a detailed inven- tory of the airport’s infrastructure at the ready will assist the airport sponsor and community stakeholders in marketing the airport to potential tenants and ease the development planning process. An Airport Master Plan will typically inventory an airport’s infrastructure assets in detail, thus making the Master Plan the ideal starting point for an infrastructure inventory. However, several years may pass before an Airport Master Plan is updated, so construction of any improvements in the interim period may not be reflected in this document. The airport sponsor will need to keep records of airport infrastructure independent of the Master Plan, focusing on leasable land and facilities, as well as land and facilities that are currently under lease. While the most important 32 Guidebook for Developing and Leasing Airport Property

piece in the inventory analysis is the land that the airport owns and controls, the airport sponsor needs also to be aware of any key infrastructure or features immediately surrounding the airport such as access roads, utilities, industrial parks, vacant land available for development, and any associated zoning reg- ulations. Again, the availability of such infrastructure inventory information will assist the airport and community stakeholders in marketing and promot- ing the airport to potential tenants and developers. 3.1.3 Land Use Plan Establishing and aligning the long-term development goals of the airport and community with potential tenants is a key function of the airport sponsor and a Land Use Plan provides the map where each type of development will occur (e.g., aeronautical versus nonaeronautical use). Not all potential lease agree- ments fit within the overall goals and direction of the airport or the commu- nity; this can be especially true of nonaeronautical land uses because of the need to develop aviation-compatible projects within close proximity of the airport. When noncompatible land uses exist, such as those outlined in Advisory Cir- cular 150/5020-1, Noise Control and Compatibility Planning for Airports, and/or Advisory Circular 150/5200-33B, Hazardous Wildlife Attractants On or Near Airports, operational conflicts can arise that either compromise safety or com- promise the long-term opportunities that exist for the airport. A Land Use Plan for a portion of, or for the entire airport, is an excellent visioning tool for the airport sponsor to utilize. Land Use Plans can be a valu- able resource in outlining general characteristics of the land on and around the airport, often complementing and/or augmenting a comprehensive planning model used by public entities. Land Use Plans are instrumental in identifying types of uses on or around the airport and can be referenced for compatibility. Non-compatible land uses such as residential development, for example, should not be in close proximity to runway ends. Similarly, compatible land use such as industrial, may illustrate an opportunity for similar on-airport development, whether it’s aeronautical or non-aeronautical. Land Use Plans are also routinely used to augment ALPs by adding detail to a specific area. An ALP may, for example, show an area of industrial development, whereas a Land Use Plan may take that same area and go into the detail of utility infrastructure, existing and proposed road- ways, example pad sites, and/or differentiation of development type within the subject area. 3.1.4 Airport Business Plan In addition to aligning airport goals with those of the community, the airport sponsor must ensure the airport remains a viable economic entity as it moves forward with development. An Air- port Business Plan is an excellent tool to achieve this goal. A successful Airport Business Plan will examine both the market-driven realities of the airport’s community as well as the financial situa- tion in which it is operating. The airport sponsor must be able to identify anticipated airport demand within its market area (or catchment area) in relation to competing airports while simul- taneously identifying areas in which the airport can maximize its revenue while meeting current and forecasted demand. In order to accomplish these goals, an Airport Business Plan must exam- ine several facets of the airport and its surrounding community, including airport facilities and services (current and planned), population and economic growth, surrounding airports, airport lease policy, rates and charges, financing availability/sources, and land use planning among other Airport Owner/Sponsor Role 33 Land and infrastructure develop- ment can be a risky venture for public entities not specializing in these aspects. Having a detailed and consistent Land Use Plan can help minimize these risks by allow- ing for long-term planning and phasing of development projects. With intentions of facilitating com- mercial and industrial development around the airport, Pittsburgh International Airport initiated a phased commerce park develop- ment program on land not suit- able for aeronautical use. With a detailed plan in hand, the airport pursued grant funds for infrastruc- ture and civil site development consistent with its established development goals. This approach has resulted in the construction of more than 2,000 feet of roadway, utilities, and other infrastructure that was essential to the eventual marketing and leasing of the commerce park.

factors. Bringing these multiple factors into a single, clear, concise, and implementable strategic document is the hallmark of a successful business plan. The market analysis section of the Airport Business Plan must be designed to identify poten- tial airport tenants and/or business sectors that can be supported by, and are desirable to, the air- port and its surrounding community. A market evaluation must identify which aviation- and airport-intensive industries are best suited for both the community (based upon economic and demographic profile) and for airport capabilities and infrastructure (as detailed in the Airport Master Plan and infrastructure inventory analysis). This analysis will identify where the airport is capable of recruiting new business and tenants without structural or institutional changes and where and what type of changes or reforms may be needed to successfully attract the targeted industries/activity. The financial planning tasks within an Airport Business Plan must include the preparation of revenue and expense projections as well as capital expenditure planning. A key component of this task is an examination of existing leases with particular attention to existing and future rev- enue generated from the leases. The airport sponsor should ensure that all current and potential lease agreements meet financial thresholds identified in any established leasing policy. A lease rate-setting exercise should also be conducted, whereby rates at similar sized airports with com- parable infrastructure and services are compared to those currently in effect at the airport. Through this exercise, the airport sponsor will be provided with a comparative basis to set or adjust current land and facility rates and charges. 3.1.5 Target Industry Analysis The Target Industry Analysis can be done as part of the Airport Business Plan, or as a stand- alone study. The goal of a Target Industry Analysis is to identify businesses and industries that are most suited to conduct business on available airport land. Typically, the Target Industry Analy- sis will focus on nonaeronautical businesses suitable for airport lands that do not have airside access or are deemed not to have any future aeronautical uses. Generating a list of target industries is accomplished by examining regional demographic trends, employment con- centrations, industry clusters, the regional industry profile, and other com- munity attributes (e.g., roadway infrastructure, utilities, communications, available incentives) in conjunction with specific airport infrastructure, land availability, and competing airport considerations. Through this exercise, a list of business and industry types most suited for both the community and the airport will be derived. The airport sponsor may want to consider working closely with local eco- nomic development agencies and the local chamber of commerce when undertaking this exercise. Not only will these organizations help in identify- ing the target industries most suited for the region (particularly nonaeronau- tical businesses), they can also help in recruiting the targeted businesses. 3.2 Grant Assurances and Federal Compliance The airport sponsor is responsible for assuring that any lease or land use agreement is in compliance with applicable federal regulations and adheres to FAA guidance. Compliance considerations must be examined in the con- text of both the anticipated use of the land and in the structure of the lease. 34 Guidebook for Developing and Leasing Airport Property Albany International Airport has pursued the Very Light Jet (VLJ) market niche and proactively approached HondaJet after devel- oping a Factory Service Center for Eclipse Aviation. The Airport had learned that HondaJet was inter- ested in a New England location, so it offered a quick, efficient, and friendly package that included options on airport land and per- mitting assistance that fulfilled HondaJet’s facility needs and time- frame. The approach was focused on the user’s needs and the clus- tering of like businesses, resulting in an economic win for the region.

Grant assurances cover a wide gamut of federal regulations, culled from multiple pieces of the FAA Advisory Circulars, Executive Orders, and Federal Regulations, all designed to ensure that the airport sponsor, and any potential tenant at the airport, comply with existing regulation (both aviation specific and nonaviation in nature) in the development, leasing, and operation of airport land. The FAA introduces grant assurances with the following explanation (FAA, Order 5190.6B, 2009): When airport owners or sponsors, planning agencies, or other organizations accept funds from FAA- administered airport financial assistance programs, they must agree to certain obligations (or assurances). These obligations require the recipients to maintain and operate their facilities safely and efficiently and in accordance with specified conditions. The assurances appear either in the application for Federal assistance and become part of the final grant offer or in restrictive covenants to property deeds. The duration of these obligations depends on the type of recipient, the useful life of the facility being developed, and other con- ditions stipulated in the assurances. There are a total of 39 individual grant assurances listed in Appendix A of the FAA Airport Compliance Manual (Order 5190.6B) (see Appendix D for Web link). However, not all of these grant assurances are directly applicable to the airport sponsor-tenant relationship, either in the airport development context or in the more traditional lessor-lessee relationship. The following sections present those grant assurances that have the potential to directly impact airport land development, business arrangements, and lease structure. If the FAA deems the airport sponsor to be in violation of any sponsor grant assurances, federal airport funding could be curtailed until the airport is no longer in violation. A detailed discussion of airport sponsor federal grant obli- gations and responsibilities can be found in Chapter 4 of the FAA Airport Compliance Manual (Order 5190.6B). 3.2.1 Airport Operation Protection Grant Assurance 5 speaks to Preserving Rights and Powers and is designed to ensure that the airport sponsor does not enter into any agreement that will inhibit its ability to provide the core services of a public-use airport. This is a very broad assurance that states at its outset: It (the airport sponsor) will not take or permit any action which would operate to deprive it of any of the rights and powers necessary to perform any or all of the terms, conditions, and assurances in the grant agreement without the written approval of the Secretary, and will act promptly to acquire, extinguish or modify any outstanding rights or claims of right of others which would interfere with such performance by the sponsor. Grant Assurance 5 also limits the transfer or disposal of land on which federal funds have been spent without the approval of the FAA, which is addressed in greater detail under Grant Assur- ance 31: Disposal of Land. The airport sponsor should consider all aspects of airport operations and the many systems that are required for sustained airport operations. For example, an air- port’s utility infrastructure is vital to airport development, so failure on the airport sponsor’s part to retain legal access to its utility systems could in fact be considered a noncompliance issue. In the case of privately owned, public-use airports, this grant assurance stipulates that in order to be in compliance, the airport must remain in operation as a public-use facility. 3.2.2 Community Considerations Community considerations are addressed in Grant Assurances 6, 7 and 8. These assurances are designed to ensure that the airport sponsor accounts for the existing plans, interests, and con- cerns of both the surrounding community (particularly local planning agencies) and current airport users prior to entering into an airport development or leasing agreement. These consid- erations become more prevalent in larger land development or commercial enterprise lease agreements, but do not necessarily require action on the part of the airport sponsor in the case Airport Owner/Sponsor Role 35

of hangar lease agreements for existing facilities. The following provides a summary of what can be termed the “community considerations” grant assurances: Grant Assurance 6: Consistency with Local Plans. The project must be reasonably consistent with public agency plans (existing at the time of submission of the application) for the develop- ment of the area surrounding the airport. Grant Assurance 7: Consideration of Local Interest. The airport sponsor must give fair con- sideration to the interest of communities in or near where the project may be located. Grant Assurance 8: Consultation with Users. The airport sponsor must undertake reasonable consultations with affected parties using the airport at which the project is proposed. 3.2.3 Land Management Compliance There are four grant assurances that deal specifically with land use and land management, with guidelines focusing primarily on safety, planning, and airport standards. Note that disposal of airport land is covered in the next section, Land Releases. The following provides an overview of the sponsor assurances that must be considered to ensure airport compliance: Grant Assurance 20: Hazard Removal and Mitigation. Compliance with this assurance is designed to ensure the safety of airport flight operations. The airport sponsor must take appro- priate action to assure that terminal airspace required to protect instrument and visual opera- tions to the airport are adequately cleared and protected. This involves not only removing or mitigating existing airport hazards, but also preventing the construction or creation of future airport hazards. Grant Assurance 21: Compatible Land Use. The airport sponsor must take appropriate action, including the adoption of zoning laws, to restrict the use of land adjacent to, or in the immediate vicinity of, the airport to activities and purposes compatible with normal airport operations. This includes considerations for noise compatibility of any planned development on such land. Grant Assurance 29: ALP. The ALP is considered the key tool in planning and coordinating future airport development. It is mandated that the airport sponsor keep the ALP up to date at all times, showing (1) boundaries of the airport and all proposed additions, together with the boundaries of all offsite areas owned or controlled by the sponsor for airport purposes and pro- posed additions, (2) the location and nature of all existing and proposed airport facilities and structures, and (3) the location of all existing and proposed nonaviation areas with all existing improvements. Grant Assurance 38: Hangar Construction. This assurance states that an aircraft hangar owner is subject to airport rules and regulations as dictated by the airport sponsor and stipulated in the lease. If the airport sponsor and a person who owns an aircraft agree that a hangar is to be con- structed at the aircraft owner’s expense, the airport sponsor will enter into a lease agreement with the aircraft owner “that is subject to terms and conditions on the hangar as the airport owner or operator may impose.” These terms and conditions are typically spelled out in the lease agree- ment and will reference the Airport Minimum Standards document. It is important to note that all changes to the ALP must be approved by the FAA. In fact, close coordination with the FAA and its appropriate airport district office is prudent in complying with all of the above grant assurances while embarking on airport development. Good commu- nication and close coordination is a sound strategy for avoiding instances of noncompliance with federal grant assurances. 36 Guidebook for Developing and Leasing Airport Property

3.2.4 Land Releases Land releases involve the disposal of airport lands, and, more specifically, the approval required of the FAA to “release” land acquired with federal funds (thus allowing the airport sponsor to dispose of the land or allow it to be used for nonaeronautical purposes). The airport sponsor may dispose of land if said land is deemed unnecessary for aeronautical purposes. How- ever, the airport sponsor may be required to reimburse the FAA, or the FAA may stipulate how land sale proceeds are to be spent by the airport sponsor. The following provides an overview of the assurance addressing the disposal of airport land purchased with federal funds: Grant Assurance 31: Disposal of Land. This assurance stipulates when and how an airport sponsor can dispose of land acquired with federal funds. The airport sponsor must repay the FAA the portion of the proceeds “which is proportionate to the United States’ share of the cost of acquisition of such land.” In addition, the airport sponsor may purchase the land for a propor- tional share of the initial federal investment, based on current fair market value. The disposal of land must comply with federal assurances under the following circumstances: • Land purchased under a grant for airport noise compatibility purposes can be disposed of when the land is no longer needed for such purposes, at fair market value, and at the earliest feasible time. The proceeds will either be paid back to the FAA (net gain can be kept by the airport spon- sor after repayment), or be reinvested in an approved noise compatibility project. • Land purchased under a grant for airport development purposes (other than noise compatibil- ity) can be disposed of when the land is no longer needed for airport purposes, at fair market value. At the FAA’s discretion, the proceeds due to the FAA can be reinvested in another eligible airport improvement project, or be paid for deposit in the trust fund if no eligible project exists. • Land is considered to be needed for airport purposes (not eligible for disposal) if it may be needed for aeronautical purposes (including runway protection zones) or serve as noise buffer land, and/or the revenue from interim uses of such land contributes to the financial self-sufficiency of the airport. Within the context of airport development, the airport sponsor must be careful not to structure a lease agreement that may violate the Disposal of Land assurance due to an extended lease term. The FAA will typically view any lease term in excess of 50 years as a disposal of land, and therefore subject to the stipulations listed in Grant Assurance 31. Often, maximum lease terms are set by local or state statute and may exceed what the FAA considers an acceptable length. The FAA Airport Compliance Manual, Part VII: Releases and Property Reversions (Order 5190.6B) provides a detailed overview on the release and disposal of airport land. The FAA defines disposal of land to include a lease in excess of 50 years, while certain states allow for longer term leases without considering them a disposal of property. The airport sponsor can balance these two definitions by meeting the state standard first, and then presenting the lease to the FAA for consideration and concurrence before executing agreements. Several of the case stud- ies mentioned in this Guidebook include long-term leases, so it is important to coordinate with the FAA’s Airport Development Office before finalizing such a negotiation, should the airport spon- sor choose to use one of these case studies as a model. 3.2.5 Business Practice Assurances There are three primary grant assurances that speak directly to the business practices of the air- port sponsor. These grant assurances impose guidelines as to how the airport sponsor must inter- act with commercial and noncommercial tenants on the airport, and are important practices in establishing a fair and equitable business environment. These assurances directly impact the Airport Owner/Sponsor Role 37

airport sponsor, and, in certain cases, dictate business practices to airport tenants, even though the ultimate responsibility for compliance falls to the airport sponsor. The following paragraphs briefly summarize the core compliance mandates of each of the FAA Sponsor Assurances that speak to business practices of the airport sponsor, along with some descriptive examples of the intent of the assurances: Grant Assurance 22: Economic Nondiscrimination, addresses the equitable treatment of air- port tenants by the airport sponsor in assessing rates, charges, and lease terms. • The airport sponsor will make the airport available as an airport for public use on reasonable terms and without unjust discrimination to all types, kinds, and classes of aeronautical activ- ities, including commercial aeronautical activities offering services to the public at the airport. • Any commercial aeronautical business operating at airport must (1) furnish services on a rea- sonable basis to all airport users and (2) charge reasonable prices for each unit or service and be allowed to make reasonable and nondiscriminatory discounts, rebates, or other similar types of price reductions to volume purchasers. • Each FBO at the airport shall be subject to the same rates, fees, rentals, and other charges as are uniformly applicable to all other FBOs operating at the airport. • Air carriers (whether as a tenant, nontenant, or subtenant of another air carrier) shall be sub- ject to nondiscriminatory and substantially comparable rules, regulations, conditions, rates, fees, rentals, and other charges with respect to facilities. • The airport sponsor will not prevent any person, firm, or corporation operating aircraft on the airport from performing any services on its own aircraft with its own employees (includ- ing, but not limited to maintenance, repair, and fueling). Grant Assurance 24: Fee and Rental Structure, simply states that the airport sponsor must set rates, charges, and leasehold rents that, to the extent possible, will ensure the financial self- sustainability of the airport. This grant assurance instructs the airport sponsor to “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.” The assurance stipulates that federal funds cannot be included in the cost basis used to establish fees, rates, and charges to airport users. Grant Assurance 39: Competitive Access, addresses a reporting function required of the air- port sponsor (at a medium-hub or large-hub airport only) should the airport, due to lack of capacity, be unable to accommodate new or expanded service by a commercial carrier. This assurance states that if a large-hub or medium-hub airport sponsor is unable to accommodate one or more requests by an air carrier for access to gates or other facilities, the airport sponsor must report the situation to the FAA. The report must (1) describe the requests; (2) provide an explanation as to why the requests could not be accommodated; and (3) provide a time frame within which the airport will be able to accommodate the requests, if at all. 3.2.6 Exclusive Rights Exclusive Rights are discussed in great detail in Chapter 8 of the FAA Airport Compliance Man- ual (Order 5190.6B), and defined as “a power, privilege, or other right excluding or debarring another from enjoying or exercising a like power, privilege or right.” The Compliance Manual further states that such a right “may be conferred either by express agreement, by imposition of unreasonable standards or requirements, or by another means.” Noncompete clauses, if struc- tured in such a way that expressly forbids the airport sponsor from leasing airport property to a category of lessee (i.e., potential competition) and right of first refusal clauses that effectively 38 Guidebook for Developing and Leasing Airport Property

allow an existing tenant to land bank airport property (i.e., lease land without constructing improvement within a set time-frame), can, and often are, considered by the FAA to be the grant- ing of exclusive right. As such, the FAA cautions that such clauses be avoided. Grant Assurance 23: Exclusive Rights, states that the airport sponsor cannot grant any single commercial enterprise exclusive rights to conduct aeronautical activities or be the sole provider of services to that airport. The prohibition on granting exclusive rights does not apply to services provided by the airport sponsor itself. The airport sponsor may elect to be the sole provider of serv- ices such as fueling or maintenance, but must do so with the airport sponsor’s own employees and equipment (i.e., the services and management of the enterprise cannot be contracted out to a third-party provider). 3.2.7 Environmental Compliance The airport sponsor is responsible for the overall implementation of the National Environ- mental Policy Act (NEPA), as well as other federal environmental laws and regulations. This includes airport noise compatibility planning [Federal Aviation Regulations (FAR) Part 150], airport noise and access restrictions (FAR Part 161), environmental review for airport develop- ment, and the application of the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970. The airport sponsor is ultimately responsible for ensuring environmental compliance of the tenants and users of airport property. Environmental responsibility is an integral part of the sponsor-tenant relationship and, as such, the sponsor must ensure that tenant’s planned development and/or its on-airport opera- tions are in full compliance with federal, state, and local environmental regulations. Environ- mental compliance may vary from airport to airport based upon state and local statutes, and even airport-specific guidelines. Despite the potential variations in applicable regulations, there are core guidelines for the airport sponsor to follow in order to be NEPA compliant when under- taking an airport development project. The National Environmental Policy Act (NEPA) Imple- menting Instructions for Airport Actions, (Order 5050.4B) states the following under the Airport Sponsor Responsibilities sub-heading (NEPA, 2006): As an applicant for federal approval, an airport sponsor should take on some or all of the following responsibilities: (1) In consultation with the FAA’s Office of Airports (ARP), planners and environmental specialists should consider known environmental factors in early master planning efforts regarding proposed airport development projects. Doing so would help the sponsor: a. Identify obvious, specially-protected environmental resources such as Federally-listed endan- gered species, historic properties, wetlands, and parkland during the development’s conceptual phase when the greatest range of alternatives exists. b. Consider practicable, possible, or prudent alternatives to avoid specially-protected resources. c. Consider conceptual mitigation in project design to reduce unavoidable environmental effects if no practicable, possible, or prudent alternative exists. (2) Provide environmental information to its consultant or to ARP. (3) Prepare Environmental Assessments (EAs) or hire qualified environmental contractors to prepare those documents. (4) Provide opportunities for public participation and a public hearing, if one is appropriate. (5) Consult with ARP personnel, and as needed, coordinate with Federal, State, and local agencies, Federally-recognized Tribes, and the affected community as described in this Order. (6) Join ARP in a Memorandum of Understanding to pay the contractor ARP selects to help it prepare the Environmental Impact Statement for a proposed action. The list of potential environmental issues and compliance mandates with the potential to impact airport development is significant and will likely vary based on the size, scope, and intended function of the airport development project. It is not possible to address them all within Airport Owner/Sponsor Role 39

the context of this Guidebook, though the FAA does offer guidance to the airport sponsor in nav- igating environmental policy complexities as they pertain to airport sponsors. This guidance can be found in the following FAA publications: • National Environmental Policy Act (NEPA) Implementing Instructions for Airport Actions (Order 5050.4B); • FAA Environmental Desk Reference for Airport Actions; and • Environmental Impacts: Policies and Procedures (Order 1050.1E CHG 1). 3.2.8 Through-the-Fence Agreements A through-the-fence (TTF) agreement is unlike a land or facility lease in that it does not involve airport-owned property. Instead, a TTF agreement authorizes access to the airport from privately- owned property adjacent to the airport. The decision of whether or not to allow TTF access to prop- erty owners is for the airport sponsor to decide, as the airport is not required to grant direct access to adjacent property owners. Both positive and negative examples of TTF agreements can be found. Note that this discussion is directed toward commercial aeronautical application of TTF access. TTF access to residential dwellings, with or without hangars, is discouraged by the FAA and cur- rently under policy review at the time of this writing. The FAA provides guidance on TTF agree- ment in the FAA Airport Compliance Manual (Order 5190.6) and advises against such agreements, but does not forbid them. Specific FAA positions on this subject include: • The existence of such an arrangement could place an encumbrance upon the airport property unless the airport owner retains the legal right to access the land. The FAA does counsel the off-airport property owner to conform in all respects to the requirements of any existing or proposed grant agreement(s). • The development of aeronautical enterprises on land uncontrolled by the owner of the pub- lic airport can result in a competitive advantage for the TTF operator to the detriment of on-airport operators. • Arrangements that permit aircraft to gain access to a public landing area from off-airport properties complicate the control of vehicular and aircraft traffic. This is not to say that an airport should shy away from entering into these agreements; struc- tured properly, a TTF agreement can be beneficial for both the airport and the property owner, and land constraints of the airport sponsor may present solid rationale for a TTF arrangement. The concerns outlined above can be addressed, or at least mitigated, through a well-constructed agreement between both parties. Any TTF agreement should include rates and charges presented to other users, tenants, and operators at the airport and give consideration to the following: • Airport expenses for the construction and maintenance of airport infrastructure such as access taxiways, roads, and access gates must be reflected in the access agreement and passed on to the off-airport property owner. • Any competitive advantages that the off-airport commercial entity realizes in relation to on-airport tenants should be accounted for in the agreement. • Safety concerns should also be addressed within the agreement. These issues and requirements will vary based upon the location and type of activity associated with the TTF application and should be incorporated on an agreement-specific, case-by-case basis. 3.3 Minimum Standards and Rules and Regulations Two important documents for any airport sponsor to adopt and keep updated are Minimum Standards and a set of Rules and Regulations. Minimum Standards set the facility, operational, and functional standards for the provision of aeronautical services, and Rules and Regulations 40 Guidebook for Developing and Leasing Airport Property

are the standards for conduct and doing business on airport lands. The combination of these two documents provides clarification on how the airport will do business and helps avoid con- fusion and misunderstanding about tenant activity and business operations. The balance for the airport sponsor is to have these foundational documents in place and that they are stringent enough and set the threshold high enough for the type of services it wants from aviation-related businesses, but not so stringent as to discourage airport development. These documents should ideally be developed prior to concluding a lease, and referenced in the lease agreement as an exhibit, along with language to the effect that Minimum Standards and Rules and Regulations are subject to change from time to time. Since these two foundational documents are living instruments that can change as the airport matures, and a lease may span multiple decades, it’s important to both acknowledge and allow for occasional changes. The caution to change is that an increase to standards and rules is much easier than a reduction. If a tenant has made signif- icant investment to meet a set of Minimum Standards, and then the standards are lowered to allow easier access to competitors, the tenant may conclude that the airport handled the lease in bad faith. On the other hand, increasing the standards to make the threshold for entry higher, and then grandfathering the tenant that has already made the investment, generally appeals to the sense of fairness. Both the Minimum Standards and the Rules and Regulations documents should evolve over time, just as the ALP is changed to reflect current conditions and changing ultimate solutions. Regular updates help modify expectations for investment, operation, and service to the aviation public as the airport matures. By way of example, a set of minimum standards that requires a broad range of services for an FBO to provide (line service, avionics, flight instruction, charter operations, airframe and power plant repair) may have been quite acceptable 10 to 20 years ago, but may well preclude a new operator from coming to an airport today. Specialized aviation ser- vices have evolved over that same 10- to 20-year timeframe, so fewer FBOs are equipped for, and fewer markets can support, this broad-brushed FBO model. A more contemporary set of mini- mum standards is likely to list a menu of specialized aviation services and require a specific num- ber of those services be provided in order to meet the minimum standards for an FBO, thereby allowing an operator the flexibility to focus on its own core strengths rather than subsidize below-par services that the operator may be ill-equipped to provide. Maintaining a current Min- imum Standards document will adjust to a changing industry and encourage appropriate air- port development when opportunities present themselves. The two documents should also be synchronized as new or additional leases are developed. All in all, small, justifiable changes are generally more acceptable to the members of an air- port’s community than broad, sweeping changes that come after many years. Guidance on developing an Airport Minimum Standards document can be found in the following two publications: • FAA Advisory Circular AC 150/5190-7, Minimum Standards for Commercial Aeronautical Activities; and • ACRP Report 16: Guidebook for Managing Small Airports. Routinely updating an airport’s Rules and Regulations document is equally important. For example, changing insurance requirements may increase the importance of visual inspections and preclude the storage of certain solvents and materials. An airport sponsor may be taxed to include, or even anticipate, the need for specific language that addresses unforeseen issues that may occur in the future. Coordination of such language in all of its leases would be tedious, but an airport sponsor can easily reference its Rules & Regulations in its leases, and that they may be updated from time to time. This approach allows the airport to respond to contemporary issues by simply updating its Regulations and then applying the new requirements consistently to all tenants without rewriting leases. Airport Owner/Sponsor Role 41

Rules and Regulations documents provide for the safe, orderly, and efficient operation of the airport. ACRP Report 16: Guidebook for Managing Small Airports, provides the following list of topics that should be addressed by an airport Rules and Regulations document: • Aircraft rules, • Personal conduct, • Animals, • Smoking, • Waste containers and disposal, • Storage, • Pedestrians, • Vehicle operations, • Fueling safety, • On-airport traffic rules, • Environmental restrictions, • Airport residences, • Hangar construction standards, and • Fire safety. 3.4 Leasing Policy Airports should develop a Standard Leasing Policies document and draft contract language. Spe- cific leasing policies will vary from airport to airport depending on factors such as local and state regulations and land uses. Leases typically vary depending on the tenant and the negotiation, but thinking through a policy and committing the policy to writing will assist the airport in moving quietly through a development process. Though these docu- ments are not directly included within the lease document, they will govern much of what the lease agreement will and will not permit, provide guidance on lease rates, and stipulate the general use, appearance, maintenance, and scale of any leasehold improvements. The policy established by the airport sponsor should pro- vide guidelines to be used to establish lease rates and conven- tions applicable to individual tenants in a uniform manner, understanding that market rates are established at a point in time and that establishing rates can be somewhat subjective. Subjectivity can be reduced by identifying comparables of similar development type in the market, and considering the local, regional, national, and global economies of the time. 3.5 Stakeholder Coordination There are typically multiple stakeholders involved in an airport lease agreement, beyond the principal parties of the lessor and the lessee. In order to achieve alignment with the local community, the development goals of the airport and the community must be understood and advocated by all parties in order to ensure that all interests are met by poten- tial development and lease agreements. Stakeholders, with 42 Guidebook for Developing and Leasing Airport Property If a proposed project has an economic develop- ment component, the number of project stake- holders the airport sponsor must partner with, and the complexity of the arrangement, can grow rap- idly. When the Collin County Regional Airport tar- geted the EDS/Hewlett Packard (HP) corporate hangar complex for relocation to its airport, it relied on the assistance of many community stake- holders. An eventual agreement was achieved through a complex arrangement between Collin County Regional Airport, the City of McKinney, EDS/HP, the McKinney Economic Development Corporation (MEDC), and Collin County Regional Investments (CCRI). The airport leases the land to CCRI, who developed the hangar complex. The facility is in turn subleased to EDS/HP. MEDC pro- vides a rent subsidy directly to EDS/HP, based upon the estimated minimum tax impact of the facility, and the City of McKinney provided a grant to accommodate a required storm water detention facility on the leased land.

interests outside the confines of the airport environment, may influence the final lease agreement between the airport and the tenant. More often than not, outside stakeholder involvement can bring added benefit, resources, and incentives. Conversely, if all outside stakeholders are not identified early and brought into the planning and development process in a timely fashion, potential partnerships can be overlooked and barriers to the desired goals of the airport and ten- ant can materialize when all perspectives are not considered. Even when stakeholders do not directly impact the end product of a formal lease agreement between the airport sponsor and the tenant, they may be essential to the overall development of a given lease. Specifically, community stakeholders may provide support, advocacy, and/or incen- tives critical to making the development project a success. Multiple factors influence the final structure of the lease and are driven by the collective inputs of all parties that have a vested inter- est in the final outcome of the development project. To this end, it becomes critical that airport management recognize and understand the perspectives of stakeholders involved and manage the development process to take advantage of their contributions. 3.5.1 Airport Users and Tenants Current and potential users of the airport (both commercial enterprises and private tenants) are key stakeholders in most airport development projects and should be engaged in any new development activities. Needless to say, not all new projects and leases will affect all airport users; nonaeronautical development on landside parcels of land, for example, will have little impact on pilots and airside aviation-related activities. However, it is important to keep the aviation com- munity at an airport abreast of all planned development, and, if applicable, involve them early in the planning process. Simple tools such as an airport newsletter or website can be used to keep airport users up to date on any proposed development, providing for an open and accessible avenue to voice any concerns, conflicts, or constructive input. A misinformed or uninformed airport community can create unnecessary and unwanted roadblocks, while a small amount of simple communication can help avoid any such issues. 3.5.2 Economic Development Agencies An economic development agency or corporation (EDA/EDC) can come in many sizes and forms, from local agencies (focusing on a specific city or county) to statewide and federal orga- nizations. The EDA/EDC can be the airport sponsor’s most valuable ally in promoting the air- port and attracting potential tenants and its involvement should be sought in any airport business development undertaking. Assistance provided by EDA/EDC includes, but is not lim- ited to, the following: • Marketing assistance, • Site selection survey response, • Industry recruiting, • Funding and grant advocacy, • Tax incentive/abatement identification, and • Development of public-private partnerships. EDA/EDC can provide expertise in industry recruiting and marketing that the airport may not possess within its own organization. This expertise is especially crucial when it comes to market- ing and leasing land and facilities for nonaeronautical uses. While the airport sponsor may take the lead in developing and marketing airside- and aviation-related land and facilities, the economic development entity may provide value by identifying and securing financial incentives, including grants, tax abatements, and public-private partnerships that may be applicable to a given project. Airport Owner/Sponsor Role 43

3.5.3 Local Government Involvement of local government entities and community organizations throughout the plan- ning and negotiation process is important to the successful outcome of an airport development project. Examples of these organizations are • Mayor’s office/City Manager, • City or County Council or Board of Commissioners, • Local Department of Transportation, and • Metropolitan Planning Organization (MPO) or Metropolitan Transportation Planning Orga- nization (MTPO). The airport sponsor should develop ongoing relationships with these entities in order to achieve the full benefit for the airport. Cooperation among the governmental organizations can often lead to synergies in planning and funding that can impact airport development projects for years into the future. Open and ongoing communication between organizations can open devel- opment opportunities and revenue sources that the airport sponsor may or may not have con- sidered in the course of normal planning. 3.5.4 Community Organizations Involvement and partnerships with local business organizations can lead to tangible benefits for airport development projects. Airports can be essential resources for local businesses and organizations such as industrial foundations and chambers of commerce, and these organiza- tions are often eager to help. Businesses and employers in most communities are frequent users of the airport because air travel brings the benefit of greater efficiency with respect to time. Whether their airport use consists of scheduled service at hub airports or the charter of air taxi service, local businesses and organizations are important facets of a community and can be strong allies when it comes to developing airport property. Even if tangible resources are not gained through these relationships, the understanding, support, and alignment of businesses, employers, and business organizations can be vital in galvanizing community support and achieving airport goals. Hospitals and emergency service providers are other examples of commu- nity organizations that may use the airport and that may be able to lend sup- port in the development of the airport. Hospitals often rely on airports for logistical purposes: the movement of organs for transplant purposes, air ambu- lance for medically critical patients, and provision of blood/plasma are exam- ples of how airports may touch the local or regional hospital. Similarly, fixed and rotor-wing law enforcement aircraft may utilize airport facilities for the support of their operations, either on a permanent basis or in times of height- ened emergency or special event. In some cases these organizations require permanent facilities; in other cases they require as-needed access to facilities. Regardless, these are prominent community organizations and service pro- viders and can be powerful allies in gaining support for airport development and the airport in general. 3.5.5 Colleges and Universities Universities and colleges (including local community colleges) fit into the categories of both employer and community organization, as many times they are amongst the largest employers in town. These educational institutions bear further consideration within the discussion of external stakeholders and 44 Guidebook for Developing and Leasing Airport Property All users, both public and private, should be considered when devel- oping airport property. The Coastal Carolina Regional Airport received support in developing the new FBO terminal from local com- panies that regularly conducted business at the airport. After attracting $250,000 in state grants for site improvements and access roads, the local business commu- nity stepped in and donated over $35,000 worth of equipment, fur- niture, and fixtures in support of the improved “front door” to the region. To show its appreciation, the FBO installed plaques identify- ing the sponsor business in each of the donated rooms.

resources because they often have so many facets and areas of influence. Having a college and/or university within the community is a tremendous benefit, for a variety of reasons, but within the context of aviation, and specifically airport development, a college or university may have an avi- ation curriculum or even operations at the airport itself. Flight training, airframe and powerplant, and air traffic control are examples of curricula that the college or university may offer or that they could potentially expand. Also, the movement of sports teams, and the seminars and conferences that a college or university may be engaged in, may present opportunities for the airport sponsor to consider. And finally, the ability for a college or university to provide research, or to have a relation- ship on a research and development level with potential tenants, should not be overlooked. The involvement of university/college stakeholders in the airport development process can be powerful because, as is the case of many large organizations, their connectivity or lack of con- nectivity to the world affects their effectiveness in carrying out the various missions with which they are tasked. The local college or university may be critical in demonstrating demand for a service or new tenant, especially in the arena of air-service development. And examples do exist where universities and colleges have provided financial support for airport development. In any event, the local college or university is another prominent stakeholder that can provide support, or if handled poorly, be a powerful adversary to accomplishing a needed development project. 3.5.6 State Government The state government is often responsible for assisting in the development of a system of air- ports to support the state’s aviation needs. The state government also has a vested interest in pro- moting statewide economic development and activity, thus providing the airport sponsor and potential tenant with a venue for state assistance. Funding for airport development may be pro- vided by the state through transportation user fees, general funds, or in the case of state block grants, the state may allocate federal funds to airports throughout the state, often accompanied by state funds. These funds are typically granted to the airport sponsor for use on designated proj- ects and may or may not benefit a specific project, lease, or tenant. Development of airport infra- structure, such as taxiways, ramps, roadways, or utilities, may play an important role in an airport development project and often relieves the project of the fiscal burden of these required attrib- utes. States sometimes have the flexibility to move grant funds from one project to another or adjust priorities in order to facilitate a valued airport development project that will bring jobs and economic activity to the airport. Additional funds and incentives applicable to airport projects are available through direct fund- ing and grants, as well as through tax abatement and credits for employment generation. These incentives may be directed to the airport sponsor or the potential tenant depending on whether the activity generated meets the defined criteria. These incentives vary state by state but typically can be applied to airport development projects, both aeronautical and nonaeronautical. 3.5.7 Federal Government When it comes to airport development in the United States, the federal government may not be involved in day-to-day airport operations but very involved with policy direction and system planning. The federal government assists in the development of state aviation plans and provides funding for airport improvement projects through the FAA’s Airport Improvement Program (AIP). The AIP is funded from aviation user fees deposited in the federal aviation trust fund for the purpose of improving the nation’s aviation infrastructure. Publicly-owned airports that receive federal AIP grants must sign and abide by federal grant assurances, which specify, among other things, that the airport will charge fair and equitable rates Airport Owner/Sponsor Role 45

and charges for the use of the public airport. In terms of land valuation under long-term lease agreements, the airport sponsor is therefore obligated to establish a fair market rental rate. User fees for aeronautical and nonaeronautical activities are also bound by the fair and equitable test, so application of incentives and abatements must be approached with eyes wide open, always asking the question of what the airport will do when the next request arrives and what the param- eters for application of incentives and abatements should be (see Section 3.2: Grant Assurances and Federal Compliance for more information). The federal government also plays a role in both navigable airspace and height hazard issues. Specifically, the latest version of FAA Form 7460, Notice of Proposed Construction or Alteration, should be submitted by the developer/tenant early in the planning process to ensure the FAA has the opportunity to review the proposed plans within the context of impact to imaginary surfaces and navigable airspace. The FAA’s Airport District Offices provide leadership in planning and development for a safe and efficient National Airspace System (NAS). Airport District Offices also award the $3.5+ bil- lion annually in AIP grants and approve passenger facility charge collections. In addition, the FAA manages national airport planning, environmental and social requirements, and establishes policies related to airport rates and charges, compliance with grant assurances, and airport pri- vatization. A host of federal agencies may be able to participate in airport development projects as well, since airports tend to touch a broad range of eligibility. Department of Transportation funding, beyond FAA, in areas of highway and transit, economic development funding, and Homeland Security programs are among the federal programs that may also assist an airport sponsor in structuring an airport development project. In terms of planning, regulatory oversight, and as a source of funding, the federal government, through the FAA, the TSA, EPA, and the Economic Development Administration has a hand in all aspects of airport operation and potential development. Contact and cooperation with these agen- cies should be sought directly by the airport sponsor. Depending upon the size, scope, and purpose of the potential project, airport sponsors often utilize their elected representatives (U.S. Represen- tatives and U.S. Senators) to serve as advocates to voice local requests within the federal agencies. Local EDA/EDC officials may also provide a conduit to federal Department of Commerce EDA officials, opening additional avenues of funding and assistance for airport development projects. 3.6 Sociopolitical Considerations The social and political makeup of a community or a region can certainly impact airport devel- opment and bears consideration in preparing the airport for potential airport development. In many cases, airport development is viewed as a job creation opportunity, with aviation often seen as paying above-average wages. Social and political pressures can also serve as the catalyst to pro- vide incentives for development in a less than ideal or inappropriate manner. On the other hand, the sociopolitical environment surrounding an airport can provide the opposite effect. If the airport is seen as a poor neighbor bringing unwanted or undesirable activ- ity and/or noise, the community may place pressure to preclude airport development. Both examples illustrate the need for an awareness of the sociopolitical climate, and the fact that airport development can be impacted one way or the other. For these reasons, involving the stakeholders early and anticipating concerns can facilitate the development process. If fears or concerns from the community are anticipated, preparation to fairly characterize the project can be made in advance. If too much enthusiasm is anticipated, enlistment of appropriate parties to provide incentives can be orchestrated proactively. 46 Guidebook for Developing and Leasing Airport Property

3.6.1 The Airport Role in the Community Airports may be perceived differently from one community to the next, so the role the airport plays within its respective community may be unique. Some communities view their airports as generators of noncompatible development and a detriment to their growth, though airports are seen in most communities as valuable resources and a vital part of the infrastructure. Some com- munities view their airports as important attributes to attracting industry and jobs; others rec- ognize their community airport as a link to the world’s air transportation network. Perhaps the community places its airport in high esteem because it supports emergency response activities in times of natural disaster or helps provide access to time-critical medical care. Regardless of the rationale for perspective, or the combination of perspectives and public sen- timent, airports should have a solid understanding of the role they are expected to play within their respective communities before embarking on airport development. This is an important point because the airport sponsor may encounter an unexpected response when the intent to begin an airport development becomes public, especially if the airport is out of tune with the com- munity perceptions. Participation in comprehensive planning exercises and an overall engage- ment in community discussion can position the airport sponsor for a solid understanding of the role it is expected to play. Regardless of the approach, the airport sponsor needs to be seen as a member of the community, not as a visitor or an adversary. 3.6.2 Community Relations Ongoing and quality community relations can have a significant impact on airport develop- ment. An airport sponsor that has a clear vision, a well-defined set of development goals and that is adept at building community consensus to support those goals is positioned for success in car- rying out its development initiatives. Community relations are vital to the mission of articulat- ing the vision of the airport sponsor, correcting any misperceptions, and building support for the initiatives undertaken by the airport sponsor. Elected officials, in many cases, have a role to play in an airport development project, can pro- vide resources, and are eager to take leadership and ownership of the project. When afforded the opportunity to take a center-stage leadership role, providing support and being an advocate in the policy arena, elected officials can play a valuable role. When overlooked, avoided, or circum- vented, elected officials can be an unnecessary adversary that can certainly influence the success of the project. 3.6.3 The Economic Development Role Because the vast majority of public-use airports are owned by public entities, social and politi- cal externalities can have a significant effect on airport development. Most communities perceive their airports as an economic engine and an important thread in the economic fabric of the economy. In cases where the airport is owned by a public entity (e.g., a county, a city, a state, or a stand-alone authority that may be governed by a board appointed by some combination of the aforementioned public-sector entities), social agendas and political influences bear economic con- sideration. This is particularly true when a development project has the potential for providing the community with significant economic benefits (such as new employment and/or tax revenues). Sometimes an airport development project may stimulate an abundance of enthusiasm within the sociopolitical arena, bringing those pressures to get the project done and setting the stage for inappropriate involvement or application of incentives by the airport sponsor. In these cases, it may be appropriate to enlist appropriate parties (such as state and/or local economic develop- ment agencies) to proactively provide incentives through sources such as EDA grant funds and Airport Owner/Sponsor Role 47

tax abatements to avoid the airport sponsor risking violation of grant assurances with which the airport sponsor must comply. An abundance of enthusiasm from the stakeholder community can be good, but, in some instances, it can also detract from the goals of the airport sponsor. When involvement from any stakeholder reflects special interest agendas rather than the interest of the airport, the outcome can result in long-term damage. Specifically, undervaluation or inappropriate application of incentives for the sake of economic development or other special interests can set off a chain reaction of lost revenue for decades to come, or worse, loss of capital improvement funding because of a failure to comply with federal grant assurances. Sociopolitical relationships, both favorable and unfavorable, between the airport and the elected officials that govern the airport, will affect the airport sponsor’s ability to pursue oppor- tunities and negotiate the complex agreements and structures that might be required to develop large or complex airport development projects. If the sociopolitical relationship has either not been developed or is simply a poor one, the airport may find the approval process to achieve a specialized airport development to be a cumbersome and lengthy endeavor. If the airport is in a competitive site-selection process, the development prospect may ultimately gravitate toward an airport with a superior socioeconomic relationship within the community. 3.6.4 Incentives and Assurances Airport development, specifically development of facilities and improvements built on leased portions of a publicly-owned airport, can vary considerably from traditional development of prop- erty on land that is owned fee simple. Federal grant assurances generally restrict the airport owner or sponsor from selling land to the developer, especially property adjacent to aeronautical facilities such as runways and taxiways. The airport developer is, therefore, generally left with the develop- ment of improvements on leased airport-owned land. This arrangement is generally accomplished under a long-term lease of adequate time for the developer to amortize its investment. A core principle of complying with the federal grant assurances is that the sponsor must pro- vide nonexclusive use of the airport and equitable treatment of tenants and users. There are many ways to attract airport development: incentives, abatements, and grants, for example. However, the airport sponsor must maintain a level playing field for like-users of its facilities. Incentives used to attract one airport development should also be offered to other airport developments with the same attributes. For this reason, the airport sponsor may elect to distance itself from the sometimes subjective job of allocating incentives, abatements, and grants, and leave that role to other community stakeholders who are better positioned to provide these important tools. 48 Guidebook for Developing and Leasing Airport Property

Next: Chapter 4 - Project Development Considerations »
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TRB’s Airport Cooperative Research Program (ACRP) Report 47: Guidebook for Developing and Leasing Airport Property explores issues associated with developing and leasing available airport land and summarizes best practices from the perspective of the airport sponsor.

The guidebook includes a diverse set of case studies that show several approaches airports have taken to develop and lease property for both aeronautical uses and non-aeronautical uses.

The project that developed the guidebook also produced two presentation templates designed to help airports in effective stakeholder communication regarding developing and leasing airport property. The templates, designed for a non-technical audience, provide content, examples, and definitions for a presentation to community stakeholders. The templates, one for aeronautical use development presentations, and the second for non-aeronautical use development presentations are available only online.

An ACRP Impacts on Practice related to ACRP Report 47 is available.

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