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Suggested Citation:"Appendix B." National Academies of Sciences, Engineering, and Medicine. 2015. A Guide for Compliance with Grant Agreement Obligations to Provide Reasonable Access to an AIP-Funded Public Use General Aviation Airport. Washington, DC: The National Academies Press. doi: 10.17226/22208.
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Suggested Citation:"Appendix B." National Academies of Sciences, Engineering, and Medicine. 2015. A Guide for Compliance with Grant Agreement Obligations to Provide Reasonable Access to an AIP-Funded Public Use General Aviation Airport. Washington, DC: The National Academies Press. doi: 10.17226/22208.
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Suggested Citation:"Appendix B." National Academies of Sciences, Engineering, and Medicine. 2015. A Guide for Compliance with Grant Agreement Obligations to Provide Reasonable Access to an AIP-Funded Public Use General Aviation Airport. Washington, DC: The National Academies Press. doi: 10.17226/22208.
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Suggested Citation:"Appendix B." National Academies of Sciences, Engineering, and Medicine. 2015. A Guide for Compliance with Grant Agreement Obligations to Provide Reasonable Access to an AIP-Funded Public Use General Aviation Airport. Washington, DC: The National Academies Press. doi: 10.17226/22208.
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Suggested Citation:"Appendix B." National Academies of Sciences, Engineering, and Medicine. 2015. A Guide for Compliance with Grant Agreement Obligations to Provide Reasonable Access to an AIP-Funded Public Use General Aviation Airport. Washington, DC: The National Academies Press. doi: 10.17226/22208.
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Suggested Citation:"Appendix B." National Academies of Sciences, Engineering, and Medicine. 2015. A Guide for Compliance with Grant Agreement Obligations to Provide Reasonable Access to an AIP-Funded Public Use General Aviation Airport. Washington, DC: The National Academies Press. doi: 10.17226/22208.
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Suggested Citation:"Appendix B." National Academies of Sciences, Engineering, and Medicine. 2015. A Guide for Compliance with Grant Agreement Obligations to Provide Reasonable Access to an AIP-Funded Public Use General Aviation Airport. Washington, DC: The National Academies Press. doi: 10.17226/22208.
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Suggested Citation:"Appendix B." National Academies of Sciences, Engineering, and Medicine. 2015. A Guide for Compliance with Grant Agreement Obligations to Provide Reasonable Access to an AIP-Funded Public Use General Aviation Airport. Washington, DC: The National Academies Press. doi: 10.17226/22208.
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Suggested Citation:"Appendix B." National Academies of Sciences, Engineering, and Medicine. 2015. A Guide for Compliance with Grant Agreement Obligations to Provide Reasonable Access to an AIP-Funded Public Use General Aviation Airport. Washington, DC: The National Academies Press. doi: 10.17226/22208.
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Suggested Citation:"Appendix B." National Academies of Sciences, Engineering, and Medicine. 2015. A Guide for Compliance with Grant Agreement Obligations to Provide Reasonable Access to an AIP-Funded Public Use General Aviation Airport. Washington, DC: The National Academies Press. doi: 10.17226/22208.
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Suggested Citation:"Appendix B." National Academies of Sciences, Engineering, and Medicine. 2015. A Guide for Compliance with Grant Agreement Obligations to Provide Reasonable Access to an AIP-Funded Public Use General Aviation Airport. Washington, DC: The National Academies Press. doi: 10.17226/22208.
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Suggested Citation:"Appendix B." National Academies of Sciences, Engineering, and Medicine. 2015. A Guide for Compliance with Grant Agreement Obligations to Provide Reasonable Access to an AIP-Funded Public Use General Aviation Airport. Washington, DC: The National Academies Press. doi: 10.17226/22208.
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Suggested Citation:"Appendix B." National Academies of Sciences, Engineering, and Medicine. 2015. A Guide for Compliance with Grant Agreement Obligations to Provide Reasonable Access to an AIP-Funded Public Use General Aviation Airport. Washington, DC: The National Academies Press. doi: 10.17226/22208.
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Suggested Citation:"Appendix B." National Academies of Sciences, Engineering, and Medicine. 2015. A Guide for Compliance with Grant Agreement Obligations to Provide Reasonable Access to an AIP-Funded Public Use General Aviation Airport. Washington, DC: The National Academies Press. doi: 10.17226/22208.
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Suggested Citation:"Appendix B." National Academies of Sciences, Engineering, and Medicine. 2015. A Guide for Compliance with Grant Agreement Obligations to Provide Reasonable Access to an AIP-Funded Public Use General Aviation Airport. Washington, DC: The National Academies Press. doi: 10.17226/22208.
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Suggested Citation:"Appendix B." National Academies of Sciences, Engineering, and Medicine. 2015. A Guide for Compliance with Grant Agreement Obligations to Provide Reasonable Access to an AIP-Funded Public Use General Aviation Airport. Washington, DC: The National Academies Press. doi: 10.17226/22208.
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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.

Page 1 of 15 B-1 Appendix B PRACTICAL GUIDE TO THE LEASE AND USE OF AIRPORT PROPERTY

B-2 Introduction When it comes to airport sponsors providing reasonable access to AIP-funded public use general aviation airports, it is not so much about determining whether or not certain aeronautical activities should be permitted at the airport, it is more about ascertaining how (and often time, where) certain aeronautical activities can be accommodated while simultaneously maintaining the safety, utility, and efficiency (and the security and compatibility) of the airport for the benefit of the public.1 While most sponsors refrain from prohibiting aeronautical activities outright, the imposition of irrelevant, unreasonable, inappropriate, or unattainable requirements (or unreasonable delays in negotiations) may be tantamount to denying access to a general aviation airport.2 For this reason, the lease and use of airport property for conducting aeronautical activities will be addressed in this appendix to the Guide. While a variety of entities may seek access to general aviation airports to engage in a diverse array of aeronautical activities, this appendix will focus primarily on the lease and use of airport property for commercial aeronautical purposes.3 It is beyond the intended scope of this Guide to discuss every term or condition that may be imposed by an airport sponsor relating to leasing airport property for conducting commercial aeronautical activities at a general aviation airport. Therefore, this appendix will focus primarily on the policies, standards, and/or rules that airport sponsors may enact relating to leasing airport property (in general) and granting access for conducting commercial aeronautical activities (in particular) at a general aviation airport. The Art and Science of Leasing Airport Property In many ways, art is about being creative. While this can be an important element when it comes to leasing airport property at a general aviation airport, within the context of this Guide, it refers to the art of: (1) understanding the interests, perspectives, and expectations of people; (2) negotiating key terms and conditions; and, (3) ultimately, reaching mutually beneficial agreements. Science, on the other hand, as it relates to leasing airport property, is about complying with laws, regulations, obligations, and guidelines, working within a complicated framework of parameters (e.g., planning, development, operation, management, financial, legal, etc.), and 1 For purposes of brevity and consistency with the FAA, throughout this appendix, when “safety, utility, and efficiency” are used, this shall imply security and compatibility as well. 2 For purposes of brevity, throughout this appendix, when “general aviation airport” is used, it shall mean an AIP- funded public use general aviation airport. 3 For purposes of brevity, throughout this appendix, when “lease” or “leasing” is used, it shall imply the “use” or “using” of airport property as well.

Page 3 of 15 B-3 operating and managing an airport (or a business) in such a manner as to maintain the safety, utility, and efficiency of the airport (or the business) for the benefit of the public. The development and implementation of a best practices approach, which combines art and science, is, perhaps, the best way to achieve a successful outcome. As such, in this appendix, the leasing of airport property will be discussed from a sponsor and a business perspective and a best practices approach (for leasing airport property) will be discussed. Airport Perspective Managing an airport is a complex, and often challenging and demanding, task. Airport management is a fusion of many roles and responsibilities including: administration, human resources, procurement, contracting, planning, engineering, maintenance, safety, security, marketing, public relations, and finance. Airport managers must work within existing ownership, governance, and management structures (and the powers, limitations, and/or restrictions associated with the existing structures). Airport managers must also work with a wide variety of customers and stakeholders – public and private – including governing bodies, advisory bodies, businesses (fixed base operations or FBOs and specialized aviation service operators or SASOs), tenants, consumers, users, communities, and government agencies. Airport Laws, Regulations, Obligations, and Guidelines Sponsors need to understand the key laws, regulations, obligations, and guidelines pertaining to airport development, operations, and management. This includes federal and state law, regulations, and guidance and the Airport Sponsor Assurances. Federal law includes constitutional and legislative law as conveyed in United States Code (U.S.C.). Federal regulations are conveyed in Code of Federal Regulations (CFR). Other key regulations for airports include executive orders/proclamations which are ancillary or subordinate to laws and Office of Management and Budget (OMB) Circulars. State law includes constitutional and legislative law or statutes. For the most part, state regulations are promulgated by state agencies. Many states have statutes pertaining to leasing public (including airport) property. Local laws and regulations are typically conveyed in municipal ordinances or codes which address such areas as zoning, fire, electrical, building, safety, and procurement. Case law includes federal, state, and local judicial decisions or precedent. In order to secure funding through the Airport Improvement Program (AIP), a sponsor is required to give certain assurances to the Federal Aviation Administration (FAA). In essence, sponsors must agree to comply with the assurances as a condition of receiving AIP funds. Additionally, airports conveyed by the federal government under the Surplus Property Act have deed restrictions, which are similar to the assurances, and the sponsors of such airports must comply with the deed restrictions – even if AIP funds have not been secured.

B-4 Key Airport Assurances and Guidance From an airport perspective, an understanding of the assurances and related guidance is essential. Within this context, a discussion of some of the most relevant assurances and guidance – as it pertains specifically to leasing airport property for conducting commercial aeronautical activities – follows. Assurance 23. Exclusive Rights This assurance states that the sponsor “will permit no exclusive right for the use of the airport by any person providing, or intending to provide, aeronautical services to the public.” This assurance is subject to misinterpretation – it does not mean that a sponsor is violating this assurance if there is only one FBO at an airport. Order 5190.6B, FAA Compliance Manual/Handbook, September 30, 2009 (Order 6B) states: “… the FAA does not consider the presence of only one provider engaged in an aeronautical activity as a violation of the exclusive rights prohibition.” [Order 6B, 8.6.] and “A single enterprise may expand as needed, even if its growth ultimately results in the occupancy of all available space.” [Order 6B, 8.9.d.] However, a sponsor cannot allow a business to “bank” land and/or facilities. A business must be able to put the land and/or facilities (that the business can demonstrate that it needs) to gainful aeronautical use within a reasonable period of time (or immediate productive use). [Order 6B, 8.7.b. and 8.9.d.] There are a number of additional provisions in Order 6B relating to leasing airport property including: “The grant assurances do not prohibit an airport sponsor from entering into long-term leases with commercial entities, by negotiation, solicitation, or other means. An airport sponsor may choose to select… FBOs… or other aeronautical service providers through a request for proposals (RFP) process. If it chooses to do so, the airport sponsor may use this process each time a new applicant is considered.” [Order 6B, 8.9.d.] Bold added for emphasis. As such, a sponsor is not obligated to use an RFP process to select an FBO. If a sponsor chooses to use an RFP process, this method may be used each time new (or prospective) applicants are being considered. If a sponsor chooses to select an FBO through an RFP process, the sponsor can choose one FBO (even if multiple qualified parties respond to the RFP) and if only one qualified FBO responds, the sponsor could select that entity. [Order 6B, 8.9.d.] Also, the sponsor can, but is not required to, exclude an incumbent FBO from participating in the process. [Order 6B, 8.9.d.] More information on exclusive rights is provided in AC-6.

Page 5 of 15 B-5 Airport Assurance 22. Economic Nondiscrimination This assurance states that the 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 activities, including commercial aeronautical activities offering services to the public at the airport.” Assurance 22 requires that “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 making the same or similar uses of such airport and utilizing the same or similar facilities.” Order 6B states that “The sponsor must impose the same rates, fees, rentals, and other charges on similarly situated… FBOs… that use the airport and its facilities in the same or similar manner. However, FBOs under different types of sponsor agreements may have different fees and rentals.” [Order 6B, 9.2.c.] The development and implementation of an airport leasing/rents and fees policy is one of the best ways to maintain compliance with this assurance. A well-written policy sets forth the parameters for leasing airport land and/or improvements and outlines the process for setting and adjusting rents and fees for conducting aeronautical activities. Such a policy can help ensure that airport property is leased in a consistent (objective, uniform, and not unjustly discriminatory) manner and that rents and fees are established and adjusted in a timely fashion without undue influence. A leasing/rents and fees policy should include, but not necessarily be limited to, the following key sections: leasing land and/or improvements, agreements (key terms and conditions), and rents and fees (establishing and adjusting). If a business (or any other entity – for that matter) fails or refuses to comply with an airport’s leasing/rents and fees policy (e.g., the business or entity does not pay rents for the land and/or improvements being occupied at the airport and/or does not pay the fees for the activities being conducted at the airport), a sponsor should deny access to the airport (i.e., prohibit the business or entity from gaining access to the airport to engage in aeronautical activities). Additionally, this assurance states that “The sponsor will not exercise or grant any right or privilege which operates to prevent any person, firm, or corporation operating aircraft on the airport from performing any services on its own aircraft with its own employees (including, but not limited to maintenance, repair, and fueling) that it may choose to perform.” However, as indicated in Order 6B, the service must be performed by the aircraft owner/operator or his/her employees with resources supplied by the aircraft owner/operator and conducted in accordance with reasonable rules, regulations or standards established by the airport sponsor. [Order 6B, 8.8.b.] In addition to stipulating the rules and regulations for engaging in self-service activities, a sponsor can adopt rules and regulations for the safe, orderly, and efficient use of the airport. Beyond helping maintain compliance with the Airport Sponsor Assurances, well-written rules and regulations protect the public’s health, safety, and welfare at an airport.

B-6 Rules and regulations should include, but not necessarily be limited, to the following key sections: general, aircraft, vehicle, tenants, and fueling. If a business (or any other entity – for that matter) fails or refuses to comply with the airport rules and regulations, a sponsor should deny access to the airport (i.e., prohibit the business or entity from gaining access to the airport to engage in aeronautical activities). In the event a sponsor engages in commercial aeronautical activities, the sponsor would need to meet the same conditions that would apply to commercial aeronautical service providers. Further, assurance 22 states that “The sponsor may establish such reasonable, and not unjustly discriminatory, conditions to be met by all users of the airport as may be necessary for the safe and efficient operation of the airport.” Order 6B states, “The airport owner may establish reasonable standards... However, unless the airport owner is providing such services itself on an exclusive basis, it may not refuse to negotiate for the space and facilities needed to meet such standards by an activity willing and qualified to provide aeronautical services to the public.” [Order 6B, 9.6.h.(2)] and “The assurance federally obligates the sponsor to make available suitable areas or space on reasonable terms to those willing and qualified to offer aeronautical services to the public...” and “This means that unless it undertakes to provide these services itself, the sponsor has a duty to negotiate in good faith for the lease of premises available to conduct aeronautical activities.” [Order 6B, 9.7.] Therefore, while a sponsor is required to make suitable areas or space available to willing and qualified entities, this needs to be accomplished on reasonable and not unjustly discriminatory terms and conditions. The development and implementation of airport minimum standards can help maintain compliance with this assurance. Beyond “leveling the playing field” and “promoting fair competition”, minimum standards help maintain compliance with the Airport Sponsor Assurances while also ensuring that businesses provide quality products, services, and facilities to airport customers in a safe, secure, and efficient manner. With regard to minimum standards, Order 6B states: “The FAA strongly recommends developing minimum standards because these standards typically: a. Promote safety in all airport activities and maintain a higher quality of service for airport users, b. Protect airport users from unlicensed and unauthorized products and services, c. Enhance the availability of adequate services for all airport users, d. Promote the orderly development of airport land, and e. Provide a clear and objective distinction between service providers that will provide a satisfactory level of service and those that will not. f. Prevent disputes between aeronautical providers and reduce potential complaints.” [Order 6B, 10.4.] Well-written minimum standards provide a fair and reasonable opportunity for applicants to qualify to occupy available property for conducting commercial aeronautical activities at an airport. By providing consistent threshold requirements for engaging in commercial aeronautical activities, minimum standards provide the basis for the fair, equitable, and uniform

Page 7 of 15 B-7 treatment of businesses (existing and new). As such, once adopted, minimum standards need to be consistently (objectively and uniformly) applied and enforced. Minimum standards should include, but not necessarily be limited to, the following key sections: general requirements, FBO requirements, SASO requirements, temporary activities, and permit. If a business fails or refuses to comply with the airport’s minimum standards, a sponsor should deny access to the airport (i.e., prohibit the business from gaining access to the airport to engage in aeronautical activities). It is important to note that such action would not violate the assurances. [Order 6B, 10.2.] Advisory Circular 150/5190-7, Minimum Standards for Commercial Aeronautical Activities (AC- 7) provides more information on the development and implementation of minimum standards. In this AC, the concept of protecting existing businesses from unreasonable competition is addressed. It states that considerations (for applying minimum standards) may include: “Ensure (that) standards… reasonably protect the investment of providers of aeronautical services to meet minimum standards from competition not making a similar investment.” [AC-7, 1.2. d (3)] Assurance 24. Fee and Rental Structure This assurance states that the sponsor “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 (and that AIP funding shall not be included in the rate basis when establishing fees, rates, and charges)…” However, Order 6B states “Federal law… requires that the rates, rentals, landing fees, and other charges that airports impose on aeronautical users for aeronautical use be fair and reasonable.” [Order 6B, 18.5.a.] A sponsor can adopt a leasing/rents and fees policy to help maintain compliance with this assurance. A well-written policy can help ensure that an airport is as self-sustaining as possible given the circumstances that exist. Airport Fiduciary and Customer Service Responsibilities Beyond complying with laws, regulations, obligations, and guidance and working within a complicated framework of planning, development, operation, management, financial, and legal parameters, there is an expectation that an airport will be developed, operated, and managed as a public enterprise and that sponsors will demonstrate good stewardship by: • identifying the assets (including land and/or improvements) that are/will be required to meet the needs of the public; • obtaining and investing capital in the assets identified; • making the highest and best use of the assets; and, • meeting the needs of the public by providing quality airport infrastructure and improvements and ensuring (often times, by relying on businesses) that quality aviation products, services, and facilities are provided to the public.

B-8 There is also an expectation (better yet, a given) that an airport (and the businesses located at the airport – for that matter) will be operated and managed in a safe, secure, and efficient manner. As such, when it comes to leasing airport property for conducting commercial aeronautical activities at a general aviation airport, it is important for airport sponsors to keep these two key “underlying” responsibilities – fiduciary and customer service – in mind. Aviation Business Perspective When it comes to leasing airport property for conducting commercial aeronautical activities, ideally, sponsors and businesses are working towards the same goal – both parties are trying to achieve a “win-win” by reaching a mutually-beneficial agreement through which, the parties can meet the needs and hopefully, exceed the expectations of the public (i.e., airport customers and stakeholders). Generally, sponsors are responsible for providing quality airport infrastructure and improvements (and a safe, secure, and efficient airport environment) and businesses are responsible for delivering quality aviation products, services, and facilities in a safe, secure, and efficient manner. To increase the potential for success, it is essential for a business to thoroughly understand the circumstances and conditions (past and present) and the current situation at the airport. The following questions can help achieve this objective. Present • Is airport property currently available (and ready) for lease? • Is airport property expected to become available in the future (e.g., is a lease agreement with an existing business scheduled to expire in the future)? • Is the “demand” for aviation products, services, or facilities (in the market) greater than the “capacity” (at an airport)? • Are the range, level, and quality of products, services, and facilities being provided reasonable and appropriate (for the airport and the market)? • Are products, services, and facilities currently being provided in a safe, secure, efficient, and prompt manner for a fair price? • Does the sponsor have procurement laws and/or regulations governing the lease of airport property for conducting commercial aeronautical activities? • Does the sponsor have primary management and compliance documents (PMCDs) that set forth the parameters and outline the process for leasing airport property for conducting commercial aeronautical activities? It is important to note that sponsors may not have procurement laws and/or regulations (that govern) or PMCDs (that provide guidance) for leasing airport property for conducting commercial aeronautical activities. If this is the case, it can be helpful to consider the past.

Page 9 of 15 B-9 Past • If a prospective business was interested in leasing airport property, how was it handled? o Was an application completed (and/or a proposal or business plan submitted) or did the parties negotiate a lease without an application, proposal, or business plan? o Was a competitive process (Request for Interest or RFI, Request for Qualifications or RFQ, or Request for Proposals or RFP) utilized? • If a lease agreement with an existing business was expiring, how was it handled? o Was the agreement automatically extended or renewed and if so, for how long? o Did the parties negotiate an extension or renewal of the existing agreement and if so, for how long? o Did the parties negotiate a new agreement and if so, what were the key terms and conditions of the agreement? o What was the “standing” of the existing business (historically and at the time the agreement expired)? • If an existing business was interested in leasing additional airport property, how was it handled? • What were the circumstances and conditions in the industry, within the market, and at the airport – at the time? • Had a pattern been established for doing business a certain way – with existing or prospective businesses – based on the circumstances and conditions? Patterns Predicated on a review of past practices, if a pattern is readily apparent, it may be appropriate for a business to pursue a course of action that is consistent with the pattern. However, it is important for a business to assess the circumstances and conditions in the industry, within the market, and at the airport to determine what has changed (over the years) and what may change (going forward). Additionally, a business should obtain “buy-in” (at least, conceptually) from the sponsor before pursuing a particular course of action as this could save both parties a considerable amount of time, effort, and energy. If a pattern is not readily apparent and procurement laws and/or regulations or PMCDs do not exist, the business should formulate an approach based on an assessment of the circumstances and conditions. Even if a pattern is readily apparent, it may no longer be appropriate and a different approach may be warranted based on the changes or differences in circumstances and conditions. Current Situation – Is the Airport Sponsor’s Backyard in Order? In addition to assess the circumstances and conditions (past and present), a business should carefully consider the current situation at the airport from a number of perspectives (including planning, development, operation, management, and financial) before leasing property at the airport. A discussion of each of these key areas follows.

B-10 Planning: Does the airport have primary planning documents (i.e., strategic, business, and/or master plan) that, on a collective basis, convey the airport’s mission, vision, values, goals, objectives, and action plans? Is leasing airport property (i.e., the subject property) consistent with the airport’s (short and long term) planning goals? Development: Is the airport being developed in accordance with the airport’s primary planning documents? Has consideration been given to land uses from airside and landside perspectives? Is leasing the subject property consistent with the airport’s (short and long term) development (and land use) goals? Operational: Is the airport being operated in a safe, secure, and efficient manner? Are the needs of the public being met (i.e., is the sponsor fulfilling its customer service responsibility to the public)? In many cases, airport sponsors rely on businesses to meet the aviation products, services, and facilities needs of the public. As such, is leasing the subject property consistent with the airport’s (short and long term) operational requirements while also helping the sponsor fulfill its customer service responsibilities? Managerial: Do PMCDs exist? This includes a leasing/rents and fees policy, minimum standards, rules and regulations, and development standards that, on a collective basis, if well- written: (1) contribute to the financial health of an airport, (2) facilitate orderly development at the airport, (3) promote the provision of quality products, services, and facilities at the airport, (4) protect the health, safety, interest, and general welfare of the public; and, (5) reduce the potential for (and help facilitate the successful resolution of): (a) conflicts with lessees, customers, and users, (b) complaints (which may be filed under 14 CFR, Part 13 and 16), and (c) lawsuits (in federal, state, and local courts). In essence, PMCDs set forth the parameters for doing business at an airport and, as such, PMCDs play an important role in the management of an airport. While there may be alternatives to having PGDs including a “make up the rules as you go” approach to managing the airport and “managing (the airport) by lease,” both approaches are highly problematic. Does the sponsor have PMCDs that set forth the parameters and outline the process for leasing airport property for conducting commercial aeronautical activities? Will the sponsor’s PMCDs help ensure that airport property will be leased in a consistent (objective, uniform, and not unjustly discriminatory) manner and that rents and fees will be established and adjusted in a timely fashion without undue influence? Financial: Is the sponsor developing, operating, and managing the airport as a public enterprise and in a cost-effective manner? Is the sponsor demonstrating good stewardship (i.e., is the sponsor fulfilling its fiduciary responsibility to the public)? Is the sponsor charging “market” rents and “cost-recovery” fees? Are the fees reasonable and appropriate? Is leasing the subject property consistent with the airport’s (short and long term) financial requirements while also helping the sponsor fulfill its fiduciary responsibilities? Airports are like fingerprints; no two are exactly the same. Within this context, the answers to the preceding questions will reveal whether or not an airport’s backyard is in order and, most importantly, the answers will help a business determine if the airport is a good place to lease property for conducting commercial aeronautical activities (or not).

Page 11 of 15 B-11 It is important to remember that the decision to do business at an airport is, perhaps, one of the most important choices a business can make. This approach is much like a job interview. While a potential employer wants to learn about a candidate, the candidate is also trying to learn about the potential employer (to try to determine if the company would be a good fit). Therefore, while a sponsor wants to learn about a business (and its capabilities, capacity, goals, objectives, and plans), the business should learn as much as possible about the sponsor before entering into a lease agreement that, ultimately, provides the foundation for the relationship between the parties. Best Practices Perspective Best practices are methods or techniques that consistently produce superior results or outcomes. Best practices evolve over time as better – new and/or improved – methods or techniques are identified through experience which includes “trial and error” and the practical application of “lessons learned”. Without a doubt, it is wise to study the best practices of successful organizations (both public and private). Certainly, sponsors and businesses can learn by studying the processes, procedures, and systems used by successful organizations and adopting (or adapting – for the situation and/or circumstances) the best practices identified. By implementing best practices, sponsors and businesses can leverage and build on the success of others. This is a continuous process – as best practices are fluid. Approach It is important to understand that the FAA does not require that sponsors use a specific approach to lease airport property for conducting commercial aeronautical activities. As long as the approach complies with the Airport Sponsor Assurances and is consistent with the guidance provided by the FAA, sponsors can utilize any reasonable and justifiable approach. An airport lease agreement: (1) allows the use of airport property for a specified period of time (term) for specific consideration (e.g., payment of rent) and subject to various terms and conditions; (2) conveys privileges to engage in certain aeronautical activities at the airport; (3) requires that certain obligations be met (in exchange for the privileges granted); and, (4) protects the sponsor, the public (the airport’s customers and stakeholders), and the lessee. For the most part, the FAA’s interest in lease agreements is focused primarily on the agreement’s impact on the sponsor's obligations. When the FAA reviews a lease agreement and the agreement does not appear to violate any of the sponsor’s obligations, the FAA may indicate that it has no objection to the agreement. However, the FAA does not approve leases, nor does it endorse or become a party to lease agreements. [Order 6B, 12.4.] As such, an argument can be made that the FAA’s interest regarding the approach a sponsor employs to lease airport property for conducting commercial aeronautical activities would be

B-12 similar. In other words, as long as the sponsor does not violate any obligations or contradict the FAA’s guidance, the FAA would not have any objection to the approach; although, as with leases, the FAA will not approve or endorse an approach. Options As long as a sponsor complies with the assurances and guidance, a sponsor could enter into a lease agreement through negotiation, solicitation, or other means. Within this context, a sponsor could: • Lease available airport property without soliciting the interest of others o A sponsor is not required to issue an RFI, RFQ, or RFP o A sponsor is required, however, to negotiate in good faith (with those parties who are willing and qualified to provide commercial aeronautical services to the public) to lease available and suitable airport property • Refuse to lease available airport property if: (1) the area/space is not suitable for engaging in the specific aeronautical activity; (2) the interested party is not qualified; and/or, (3) the interested party is not willing to meet the sponsor’s (reasonable and not unjustly discriminatory) terms and conditions • Issue a solicitation to lease available airport property In addition to the assurances and guidance, when developing an approach for leasing airport property for conducting aeronautical activities, sponsors need to consider: • Existing laws and regulations (as discussed throughout this Guide) • Circumstances and conditions (past and present) and the current situation at the airport Framework A best practices framework for leasing airport property begins by analyzing demand and capacity. If demand for aviation products, services, and/or facilities in the market exceeds capacity at the airport, an action plan needs to be formulated for addressing any deficiencies. The following questions can be used to determine how the deficiencies will be addressed and by whom. The demand-capacity analysis should include an assessment of the range, level, and quality of aviation products, services, and facilities being provided at the airport (capacity) and the needs and expectations of customers in the market (demand). As part of this analysis, consideration should be given to key market indicators, competition, market and customer segments, and market drivers. Additionally, the financial feasibility of adding capacity (making additional capital investment) at the airport needs to be ascertained. In other words, can capacity be added, can revenue be generated to cover costs and expenses, and can a reasonable profit and return on investment be realized (i.e., is the development sustainable). This type of analysis is also useful for ensuring that the development is appropriate (right-sized) for the airport and the market.

Page 13 of 15 B-13 • Will the sponsor work with existing entities at the airport to determine the level of interest in leasing airport property and/or developing additional capacity to address the deficiency? • Will the sponsor issue a RFI, RFQ, and/or RFP seeking responses from other parties who may be interested in leasing airport property and/or adding capacity? • If existing businesses are not interested in the opportunity and/or an acceptable response (to the RFI, RFQ, or RFP) is not received, is the sponsor willing to add capacity? If so, is the sponsor willing to: (1) enter into a management contract with an existing business (or other party) to operate and manage the capacity or (2) operate and manage the capacity directly? If an existing entity (who is qualified, has been/is in good standing, and has been/is providing excellent customer service) makes an assessment of demand in the market and determines that demand exceeds capacity at the airport and the business is ready, willing, and able (financially and otherwise) to “step up to the plate” and add capacity at the airport, why wouldn’t a sponsor negotiate an extension of an existing lease agreement or enter into a new lease agreement with the entity – especially if other property is available for other parties to develop at the airport? Conversely, if an existing entity had/has issues relating to qualifications, standing, and/or customer service and/or the entity is not willing, ready, and able to “step up to the plate”, why wouldn’t a sponsor issue an RFI, RFQ, or RFP? Solicitation A discussion of the various approaches that sponsors can use for a solicitation follows. An R F I is typically used to solicit “statements of interest” from parties who are interested in leasing property and engaging in commercial aeronautical activities at an airport. An R F Q is typically used to solicit “statements of qualifications and experience”. In contrast, an R F P is typically used to solicit “proposals” and/or a “business plan” that demonstrate(s) an interested party’s qualifications, experience, capabilities, and most importantly, that the party has the capacity (financially and otherwise) to lease and/or develop (if applicable) airport property and successfully engage in commercial aeronautical activities at an airport. While the R F Q and R F P approaches are designed to assess qualifications and experience, the R F I process is designed primarily to assess interest (in a particular opportunity) and the R F P process is designed primarily to assess business capability and financial capacity (and the overall viability) of the interested party’s proposal and/or business plan. From both a sponsor and interested party standpoint, the R F I approach is a relatively simple (straight-forward) process. Generally, it does not take as much time (it is not as labor intensive), is less costly, and can be completed relatively quickly – compared to the other approaches. The R F Q approach is a more involved process and typically, is more time consuming (labor intensive), more costly, and takes longer to complete. In contrast, the R F P approach is much more involved and usually, it is far more time consuming (labor intensive), much more costly, and takes significantly longer to complete.

B-14 Therefore, if a sponsor is interested primarily in identifying parties who are interested in a particular opportunity, the R F I process may be most appropriate. If a sponsor is interested in gaining a better understanding of the qualifications and experience of interested parties, the R F Q process may be most appropriate. If the interest of a sponsor goes beyond gaining a better understanding of the overall qualifications and experience of interested parties to learning more about the capability and capacity of interested parties to successfully fund, develop, operate, manage, and market an aeronautical enterprise at the airport, the R F P process may be most appropriate. Regardless of the circumstances, conditions, situation, or approach utilized (RFI, RFQ, and/or RFP), it is important to remember that the end does not justify the means (i.e., the final outcome does not justify the process). To be successful, the means must justify the end. Within this context, a well-written RFI, RFQ, and/or RFP document (and a well thought out process) is more likely, but not guaranteed, to provide the basis for making informed decisions and hopefully, yielding a good outcome – for sponsors and businesses alike. An important note for consideration: if a business pays “below” market rents and/or “less” than (proportional) cost-recovery fees, the sponsor may not be meeting its obligation under Assurance 24 Fee and Rental Structure (which requires that the sponsor maintain a fee and rental structure… which will make the airport as self-sustaining as possible under the circumstances existing at the particular airport). Conversely, if a business pays “above” market rents and/or “more” than cost-recovery fees, it is likely that these additional costs will be passed through (by the business) to customers which may (ultimately) result in a loss of business for the airport and the business. This is one of the pitfalls of requiring that a business pay a Minimum Annual Guarantee (or MAG) without regard to market rents and/or cost- recovery fees which could occur if a sponsor chooses to use an RFP process and awards a lease agreement to the highest bidder – as opposed to the most qualified service provider who made the best proposal and/or submitted the best business plan and offered to pay market rents and cost-recovery fees). If airport property is available for development, a sponsor can adopt development standards which set forth the parameters governing the design, development (construction), and/or modification of improvements at the airport. Well-written development standards promote consistent, attractive, and compatible high quality development at an airport. Development standards should include, but not necessarily be limited, to the following key sections: land development, design criteria, procedures for approval, and construction phase. If a business (or any other entity – for that matter) fails or refuses to comply with the airport development standards, a sponsor should deny access to the airport (i.e., prohibit the business or entity from gaining access to the airport to develop airport property). Working Together In the end, it is about sponsors and businesses working together to do what is best for the public (in general) and what is most appropriate and reasonable for the airport’s customers and stakeholders (in particular) taking everything – all perspectives, factors, and influences – into consideration.

Page 15 of 15 B-15 On one hand, it is incumbent upon sponsors – who have to work within a complicated framework of parameters – to provide the opportunity for a business to be successful. Certainly, this does not imply that sponsors are obligated to ensure the success of a business located at an airport. It does, however, put the impetus on the sponsor to create an environment (business and otherwise) that is conducive to success. On the other hand, it is equally important for a business to hold up its end of the deal by keeping its commitments and doing its part to ensure the success of the airport. At the heart of the best – most successful – airports is a true partnership between sponsors and businesses. Abraham Lincoln may have captured the concept of partnership best when he said… “Determine that the thing can and shall be done, and then we shall find the way.”

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A Guide for Compliance with Grant Agreement Obligations to Provide Reasonable Access to an AIP-Funded Public Use General Aviation Airport Get This Book
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TRB’s Airport Cooperative Research Program (ACRP) Legal Research Digest 23: A Guide for Compliance with Grant Agreement Obligations to Provide Reasonable Access to an AIP-Funded Public Use General Aviation Airport describes the assurances made by airport sponsors that receive grants from the U.S. Federal Aviation Administration, and how these assurances limit the sponsor from unreasonably restricting access for aeronautical activity at general aviation airports.

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