Guidebook for Through-the-Fence Operations (2014)

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ACRP Report 114: Guidebook for Through-The-Fence Operations94 CHAPTER SIX STRUCTURING TTF OPERATIONS 6.1 Introduction 6.2 Policy 6.3 Application 6.4 Rents and Fees 6.5 Types of Agreements 6.6 TTF Agreement Terms and Conditions 6.7 Wrap-Up 6.1 INTRODUCTION More and more, publicly owned and operated assets (like airports) are expected to be managed as a business with the goal of being financially self-sustaining. In fact, Assurance 24 (Fee and Rental Structure) requires that federally obligated airports be as financially self-sustaining as possible, given the circumstances that exist. As a result, airport sponsors may be under significant pressure to be (or become) financially self-sustaining regardless if that goal can be achieved given the circumstances that exist. For these reasons, some airport sponsors have pursued TTF operations as an alternative source of revenue. However, without proper structure, TTF operations can be highly problematic. A thorough understanding of the complex nature of TTF operations (discussed in Chapters 1 through 4) and a thorough assessment of TTF operations (discussed in Chapter 5: Assessing TTF Operations) is essential to avoiding conflicts, complaints, and disputes. Beyond the foundation established by the airport sponsor’s federal and state obligations (discussed in Chapter 2: Airport Sponsor Obligations) and the legal principles established by FAA decisions and court rulings (discussed in Chapter 3: Legal Interests and Principles), this chapter discusses the best practices that airport managers and policymakers can use to structure TTF operations. This includes the development, implementation, and enforcement of a TTF operations policy, application, rents and fees, and agreement. By providing a sound structure for TTF operations, airport management and policymakers can help ensure that a federally obligated airport will be planned, developed, operated, and managed to ensure the safety, utility, and efficiency of the airport for the benefit of the public. Additionally, providing a sound structure can help: ensure that TTF operations will have a positive impact on the airport and the community (e.g., increased aircraft operations; expansion of aviation products, services, and facilities; revenue generation and/or other financial contribution; economic and social benefits; etc.); mitigate or eliminate any potential negative impacts on the airport and the community related to TTF promote a level playing field among providers of commercial aeronautical activities (on TTF property and on-airport); and maintain compliance with federal and state obligations. operations (e.g., non-compatible land uses, adverse effects on navigational aids (NAVAIDs) and/or approaches, penetration of critical line-of-sight areas at the airport, limiting or restricting airport expansion, etc.);

95 ACRP Report 114: Guidebook for Through-The-Fence Operations 6.2 POLICY As discussed in Chapter 4: Airport Planning, Management, and Compliance Tools, airport sponsor ordinances can be used to govern the planning, development, operation, and management of the airport and set the stage for the development, implementation, and enforcement of planning, management, and compliance tools. Most importantly, an airport sponsor ordinance provides a mechanism for enforcing airport policies, standards, rules, and regulations (i.e., primary management and compliance documents). Therefore, whether an airport sponsor permits, restricts, or prohibits TTF operations, an airport sponsor ordinance is the recommended tool for establishing a policy for TTF operations. Additionally, policies, standards, rules, and regulations related to TTF operations should be incorporated into the airport sponsor’s primary management and compliance documents (as discussed in Chapter 7: Managing TTF Operations). POLICY PERMITTING AND/OR RESTRICTING TTF OPERATIONS An airport sponsor policy permitting and/or restricting TTF operations should identify the specific types of TTF activities permitted and/or restricted and incorporate the provisions discussed in this section. KEY TERMS Identify and define the key terms that are relevant to TTF operations including TTF property, TTF entity, TTF activities, TTF access, and TTF access points (discussed in Chapter 1: Introduction).. APPLICATION AND APPROVAL PROCESS Provide an outline of the approval process for TTF operations and identify the information required for the application (discussed in this chapter) including identifying the location of the TTF property and TTF access points to help facilitate updating of the ALP and Exhibit “A” Property Map (i.e., maintaining a compliant ALP set). RESTRICTIONS Some examples of the types of restrictions airport sponsors could establish for engaging in TTF operations follow: TTF entity must demonstrate that there is no on-airport land available that could meet the needs of the TTF entity (and/or accommodate related TTF activities). TTF operations must be non-commercial in nature (i.e., no commercial aeronautical TTF activities are permitted). TTF entity shall enter into a TTF agreement with the airport sponsor and pay the airport sponsor the rents and fees associated with TTF operations (as specified in the airport’s rents and fees schedule). Infrastructure costs (including TTF access controls) associated with the TTF operation (both on the TTF property and on-airport) shall be borne solely by the TTF entity. TTF entities shall enter into an avigation easement with the airport sponsor. TTF entities shall be prohibited from permitting unauthorized users TTF access or assigning (or granting) TTF access to other entities. Commercial TTF entities shall be restricted to providing commercial TTF activities only on TTF property.

ACRP Report 114: Guidebook for Through-The-Fence Operations96 GROUNDS FOR DENIAL Some examples of possible grounds for denial of an application for TTF operations include: The TTF entity’s interests and/or the TTF operation are inconsistent with the mission, vision, goals, or objectives of the airport; the best interest of the airport sponsor; any assurances; or any regulatory measure. The TTF entity and/or TTF operation, for any reason, do not comply with the policies, standards, rules, and regulations adopted by the airport sponsor for TTF operations. The TTF operation could adversely impact the general health, safety, and welfare of the public; the economic health or operational efficiency of airport operators, tenants, or users; or the safety, utility, and efficiency of the airport. The airport sponsor would be required to expend funds in connection with the TTF operation that the airport sponsor is unwilling and/or unable to expend or supply and/or that may result in a financial loss or create a hardship for the airport sponsor. POLICY PROHIBITING OR RESTRICTING TTF OPERATIONS As discussed in Chapter 5: Assessing TTF Operations, it can be difficult to broadly assess the opportunities and issues associated with TTF operations. Similarly, it may not be appropriate (depending on the outcome of the assessment) to prohibit all types of TTF activities. Therefore, if a policy prohibits (or restricts) TTF operations, it should reference the specific types of TTF activities that are prohibited (or restricted). If an assessment of an existing or future TTF operation reveals that the negative impacts (on the airport; community; airport sponsor; and/or airport operators, tenants, or users) outweigh the positive impacts, airport management and policymakers should develop and implement a TTF policy restricting or prohibiting TTF operations in the future. Such a policy could simply state one or more of the following restrictions or prohibitions: Agreements for existing TTF operations will not be renewed or extended. Future TTF operations at the airport are prohibited. Future TTF operations at the airport are restricted to the following types of TTF activities (and list the allowed TTF activities). Aircraft shall not be taxied or towed onto the airport from land adjacent to the airport. Aircraft shall not be taxied or towed onto the airport except through TTF access points designated by the airport sponsor. Vehicles and pedestrians shall not enter upon airport land except from entrances designated by the airport sponsor. 6.3 APPLICATION Airport sponsors that have established a policy that permits TTF operations and/or provides the opportunity to negotiate existing and/or new TTF agreements should utilize an application to obtain the information, data, and/or documentation necessary to conduct a thorough assessment. The application for TTF operations should be similar to the application for entities desirous of leasing on-airport land and/or improvements and/or engaging in on-airport commercial aeronautical activities. Additionally, the application could be utilized for assignment of a TTF agreement (if permitted) or a change in the majority ownership of the TTF entity (if permitted). At a minimum, the application should request the following information, data, and/or documentation:

97 ACRP Report 114: Guidebook for Through-The-Fence Operations ALL ENTITIES (REGARDLESS OF TYPE OF TTF ACTIVITY) Entity information – legal name, address, phone number Type of entity – public entity (e.g., federal, state, local, etc.) or private entity (e.g., individual, sole proprietor, partnership, corporation, limited liability corporation, etc.) Type of applicant – property owner, developer, lessee, sublessee Governing documents (residential only) – HOA covenants, conditions, and restrictions (CC&Rs) Contact information – name, title, address, phone number, e-mail address Type of request – new, assignment (if permitted), change in majority ownership (if permitted) Type of TTF activity – residential, commercial aeronautical, non-commercial aeronautical, non- aeronautical, governmental/military Legal disclosure statements regarding the entity and the individuals – crimes; violation of airport sponsor regulatory measures; judicial, regulatory, or administrative proceedings; uninsured and insured insurance claims; bankruptcy; agreement terminations; bond or surety cancellations; financial interest by an elected or appointed official Description of existing and/or proposed TTF property land, infrastructure, and/or improvements and any associated phasing Description of existing and/or proposed on-airport land, infrastructure, and/or improvements Background, experience, qualification, capabilities and responsibilities of each key member of design/construction team Evidence of ability to secure construction bond (only for improvements being made on-airport) Location and description of TTF access points and access controls TTF agreement terms and conditions – commencement date, duration, key terms and conditions Copies of applicable federal, state, and local licenses, certificates, and permits Copies of insurance certificates Description of the number and type of aircraft (make and model); length, wingspan, and height; maximum certificated takeoff weight (MTOW); and FAA registration number for all aircraft that will be based on or utilize the TTF property References – airport and financial ENTITIES ENGAGING IN COMMERCIAL AERONAUTICAL TTF ACTIVITIES Market assessment (TTF activity) – size, composition, current state, significant trends, and future outlook Operational plan Management plan Marketing plan Financial plan References – operational and customer

ACRP Report 114: Guidebook for Through-The-Fence Operations98 6.4 RENTS AND FEES One of the most significant financial issues associated with TTF operations is creating economic parity between TTF entities and on-airport operators, tenants, and/or users. On-airport entities pay airport sponsors rents and fees for occupying and/or using airport land, infrastructure, and/or improvements and engaging in aeronautical activities. Further, on-airport entities are required to comply with the airport sponsor’s policies, standards, rules, and regulations (i.e., primary management and compliance documents). Conversely, a TTF entity owns property located off-airport and typically does not pay rent (per se) to the airport sponsor. Additionally, TTF entities are not required to pay fees (relating to the TTF property or activities) to the airport sponsor. Therefore, unless a TTF agreement exists (which requires that the TTF entity pay rents and fees to the airport sponsor) for TTF activities, TTF access, and airport use, a TTF entity would enjoy a financial or economic advantage over on-airport operators, tenants, and users. A TTF entity that owns TTF property also enjoys the advantages associated with fee simple ownership that extends into perpetuity. Hence, TTF entities are not constrained by lease terms and conditions (e.g., length of lease, reversion of improvements, etc.) like on-airport tenants. As a result, a TTF entity can amortize the costs associated with the TTF property (e.g., land, infrastructure, and/or improvements) over a longer period of time and may be able to generate a higher (or more favorable – compared to on-airport tenants) return on investment. It may also be easier for a TTF entity to obtain financing and/or secure financing on better (or more favorable as compared to on-airport tenants) terms and conditions which, in turn, would lower the TTF entity’s costs. On-airport tenants do not own land as it is being leased from the airport sponsor. While an on-airport tenant may own the improvements made to the land, in most cases, the ownership of the improvements transfers or reverts to the airport sponsor at the end of the agreement term. Upon transfer or reversion, the on-airport tenant begins paying rent to the airport sponsor for the improvements. Additionally, there are other conditions and/or circumstances that could acerbate the financial disparity between TTF entities and on-airport operators, tenants, and users. For example, off-airport (fee simple) property tax rates may differ from on-airport (leasehold) property tax rates, tax incentives or rebates may be different (i.e., may be available to one entity and not the other), and/or the availability of federal and/or state funding (for infrastructure development and maintenance) may differ as well. A common theme expressed during the interviews conducted as part of the research for this guidebook is that TTF entities should pay comparable (at a minimum) or higher (preferred) rents and fees compared to on-airport operators, tenants, and users making similar use of the airport. Furthermore, TTF entities should bear the costs associated with developing and maintaining the on-airport infrastructure required to facilitate TTF access. If the TTF entity does not directly bear these costs, these costs should be recovered through the establishment of rents and fees for TTF operations. Finally, it is significant to note that airport sponsors may utilize a hybrid approach when establishing and adjusting rents and fees associated with TTF operations. Most importantly, airport management and policymakers must ensure that regardless of the approach used to establish or adjust rents and fees for TTF operations, compliance with Assurance 22: Economic Nondiscrimination must be maintained. A discussion of some of the more common approaches and the types of rents and fees typically associated with TTF operations follows.

99 ACRP Report 114: Guidebook for Through-The-Fence Operations ESTABLISHING RENTS AND FEES Based on the research, interviews, and survey conducted for this guidebook, airport sponsors utilize a number of methodologies to establish rents and fees for TTF operations. At most of the airports with TTF operations, one or more of the following types of monthly and/or annual rents and fees are typically charged. LAND, INFRASTRUCTURE, AND/OR IMPROVEMENTS (ON-AIRPORT) USED FOR TTF ACCESS All TTF operations utilize on-airport land, infrastructure (e.g., taxiways, taxilanes, apron, etc.), and/or improvements (e.g., access controls, signage, lighting, etc.) for TTF access. However, if land, infrastructure, and/or improvements are not dedicated solely to TTF access, typically rent would not be charged. Instead, a common-use fee would be charged or costs would be recovered by charging a TTF access fee (discussed in this section). When on-airport land, infrastructure, and/or improvements (which could have been used for other revenue generating purposes) are used exclusively for TTF access by a single TTF entity, airport sponsors should establish (and require that the TTF entity pay) rent (on a per square foot basis) for the exclusive use of such land, infrastructure, and/or improvements. This rate should be consistent with other similarly situated on-airport land, infrastructure, and/or improvements. When on-airport land, infrastructure, and/or improvements (which could have been used for other revenue generating purposes) are used exclusively for TTF access by multiple TTF entities, airport sponsors should establish (and require that the TTF entities pay) a TTF access fee based on the revenue that could be generated by charging rent (on a per square foot basis) for the exclusive use of such land, infrastructure, and/or improvements. This rate should be consistent with other similarly situated on-airport land, infrastructure, and/or improvements. LAND, INFRASTRUCTURE, AND/OR IMPROVEMENTS (LOCATED ON TTF PROPERTY) To maintain economic parity between on-airport operators, tenants, and/or users and TTF entities, airport sponsors should treat TTF operations as if located on-airport. Therefore, airport sponsors should establish a fee based on a rate per square foot for land associated with TTF property. The fee should be equal to or greater than on-airport land rents and at a minimum, the fee should be charged for the land being used for TTF activities and TTF access and if desired, the fee could be charged for all TTF land. In many respects, this fee can be viewed as being representative of revenue an airport sponsor would lose as a result of the TTF activity being located off (instead of on) airport. Similar to the infrastructure and/or improvements developed on-airport, airport sponsors should treat the infrastructure and/or improvements located on TTF property (e.g., hangar, office, shop, taxilane/taxiway, apron, etc.) as if located on-airport. Therefore, the airport sponsor should establish a rate per square foot fee for the infrastructure and/or improvements developed on TTF property to be paid to the airport sponsor when the ownership of such infrastructure and/or improvements would have transferred or reverted to the airport sponsor – as if located on-airport. However, this fee should not include infrastructure and/or improvements not normally developed on-airport (e.g., residential structures, vehicle roadways, pedestrian walkways, etc.). TTF ACTIVITIES established for the land, infrastructure, and/or improvements on the TTF property, an airport sponsor should establish a monthly fee equivalent to the aircraft storage fee (e.g., tiedown or hangar) that would be charged if the aircraft was stored on-airport. Residential TTF activities typically encompass a residential improvement and the storage of aircraft, most commonly inside a hangar associated with the residence. If rents and fees have not been

ACRP Report 114: Guidebook for Through-The-Fence Operations100 activities on TTF property. In addition to the fees for the land, infrastructure, and/or improvements on the TTF property, an airport sponsor should charge the same fees established for on-airport FBOs and SASOs (in order to maintain economic parity) which could include one or more of the following: fixed fee for each type of commercial aeronautical TTF activity; percentage of gross revenues associated with each type of commercial aeronautical TTF activity; fixed fee based on the type or weight of aircraft utilized in each type of commercial aeronautical TTF activity; and/or fuel flowage fee for the sale or dispensing of aviation fuels on the TTF property by a TTF entity or on- airport entity. TTF activities, if an airport sponsor has not established rents and fees for the land, infrastructure, and/or improvements on the TTF property associated with non-commercial aeronautical activities, the airport sponsor should establish a monthly fee equivalent to the aircraft storage fee (e.g., tiedown or hangar) that would be charged if the aircraft was stored on airport. TTF activities beyond the rents and fees for land, infrastructure, and/or improvements on the TTF property being used for non-aeronautical TTF activities. airports with governmental/military TTF activities, no additional rents and fees are being charged for such activities beyond the rents and fees for land, infrastructure, and/or improvements on the TTF property being used specifically for governmental/military TTF activities – as the benefit to the community associated with such activities typically outweighs any revenue potential. TTF ACCESS TTF access fees are established to recover the airport sponsor’s costs associated with facilitating TTF activities, TTF access, and use of the airport that are not recovered in the rents and fees for on-airport land, infrastructure and improvements; TTF property land, infrastructure, and/or improvements; or TTF activities. These fees, which should be based on the amortization of such costs over the term of the TTF agreement, could be charged on a monthly, quarterly, annual, or per-use basis. If established on a per-use basis, a reasonable estimate of usage needs to be ascertained or a mechanism – to monitor and record TTF access activity – needs to be developed and implemented. It is important to note that some airport sponsors with existing TTF operations may find that the TTF entity has deeded access (or an access easement) to the airport and that the entity is not required to pay TTF access fees. However, as discussed in Chapter 2: Airport Sponsor Obligations, Section 136, all TTF entities engaged in residential TTF activities at a federally obligated airport are required to pay a fee for TTF access. Assurance 22: Economic Nondiscrimination requires TTF entities engaged in all other types of TTF activities at a federally obligated airport to pay a fee for TTF access. Commercial aeronautical TTF activities encompass TTF entities engaged in commercial aeronautical Non-commercial aeronautical TTF activities encompass the storage of aircraft and in some cases, the development of complimentary improvements (e.g., office, shop, storage, etc.). Similar to residential Non-aeronautical TTF activities encompass activities that do not involve, make possible, and/or are not required for the operation of aircraft or do not contribute to or are not required for the safety of such aircraft operations. Typically, there are no additional rents and fees established for non-aeronautical Governmental/military TTF activities typically encompass federal and state government and military agencies and institutions occupying TTF property to engage in activities which primarily benefit the airport, the community, and/or national defense. Based on the research findings, at most of the

101 ACRP Report 114: Guidebook for Through-The-Fence Operations Further, as discussed in Chapter 3: Legal Interests and Principles regarding the court ruling in Kingman Airport Authority v. Hays, a court ruled that the easement ended at the airport gate and that the TTF entity would be required to pay applicable TTF access fees. The court described the easement as a “bridge to a toll road.” the fact that the airport sponsor has expended time and money to develop the TTF structure and manage the TTF operation including maintaining and repairing the airside infrastructure and/or improvements to accommodate TTF access, regardless of use. This is very similar to the approach taken with an HOA that maintains common-use facilities (e.g., recreational centers, pools, tennis courts, etc.) and charges its members regardless of usage. In essence, TTF access fees can be supported for providing the privilege of access and use, not just actual use. TTF DOCUMENTATION In addition to the preceding rents and fees, airport sponsors should establish (and require that the TTF entity pay) a fee to update the ALP and Exhibit “A” Property Map. An extensive update to the ALP may be necessary to depict TTF use on the drawing set. ADJUSTING RENTS AND FEES The methodologies utilized to adjust rents and fees for TTF operations are typically similar to the approaches utilized for on-airport rents and fees including making market-based adjustments (rents) and cost-recovery adjustments (fees) and using fixed and/or indexed adjustments. Further, at the time an existing TTF agreement is renewed, the rents and fees associated with a TTF operation should reflect the market rent for the depreciated investment in the aeronautical improvements on the TTF property. 6.5 TYPES OF AGREEMENTS Based on the research conducted for this guidebook, the type of TTF agreements used by airport sponsors (if each form having its own unique attributes. Figure 6-1 identifies some of the most common types of TTF agreements. FIGURE 6-1: Common Types of TTF Agreements A description of each type of TTF agreement follows: DEED RESTRICTION DEFINITION AND PURPOSE A deed is a written instrument conveying an interest in real property; a deed restriction is a limitation on the use or enjoyment of real property that is included in a deed. The burden of the limitation (i.e., the airport sponsor’s obligation to provide TTF access) may be for a specified term or perpetual. The burden “runs with the land” which means that it applies to any future owner of the land. The benefit of the limitation (i.e., the TTF entity’s right to use the airport land) may also “run with the land.” Some deed restrictions limit the benefit to a specific person or persons. any) and the associated terms and conditions vary considerably. TTF agreements can take many forms with Some airport sponsors with residential TTF activities may find that TTF entities (i.e., homeowners) having TTF access rights to the airport do not own aircraft. In such a case, it is recommended that airport sponsors require that the homeowner still pay a fixed TTF access fee. This recommendation is rooted in

ACRP Report 114: Guidebook for Through-The-Fence Operations102 EXECUTION A deed restriction generally arises when property is being conveyed (e.g., an entity sells land for construction of an airport). To enter into a TTF agreement using this instrument, the parties would agree to a deed restriction. Such a restriction would require that the airport sponsor allow the TTF entity to use the airport according to the terms and conditions of the deed, including the right to TTF access. Conversely, if an airport sponsor sells land to a TTF entity, any right of TTF access would be effectuated by one of the other instruments discussed in this section. A deed restriction should be recorded with the County Clerk and Recorder in the real property records. MODIFICATIONS AND TERMINATION A deed restriction can be voluntarily modified or terminated by the mutual agreement of all parties. If the burdened property owner (i.e., the airport sponsor) wishes to terminate the restriction unilaterally, it may seek a release from a court. In order to successfully terminate a deed restriction, it (i.e., the airport sponsor) must provide a legal basis for termination (e.g., the deed restriction is invalid or the restriction has terminated on its own). CONSIDERATIONS A deed restriction is a highly restrictive way to structure a TTF agreement. TTF entities may favor this restrictiveness for the certainty that it can provide (i.e., it ensures TTF access rights regardless of the policies of the airport sponsor). However, TTF entities and airport sponsors may find that this instrument fails to allow for the level of detail desired regarding terms of use and provisions for changed conditions. Circumstances giving rise to deed restrictions (e.g., transfer of TTF property) are rare. It is also important to note that in Order 5190.6B, the FAA indicates that TTF access should not be deeded, especially into perpetuity, as this would not constitute a reasonable planning horizon for the airport sponsor. EASEMENT DEFINITION AND PURPOSE An easement is an interest in land that gives its holder the right to use land owned by another person. An easement appurtenant involves a benefitted parcel (e.g., a TTF property) and a burdened parcel (e.g., an airport). In contrast, an easement in gross involves a benefitted person (e.g., a TTF entity) and burdened parcel (e.g., an airport). The distinction is important because an easement appurtenant “runs with the land” (i.e., any future owner of a TTF property would have the benefit of the easement). An easement may be for a specified term or perpetual. Additionally, an easement may grant its holder exclusive or non-exclusive rights to use the land. An easement should be recorded with the County Clerk and Recorder in the real property records. EXECUTION The airport sponsor would grant an easement to the TTF entity. Typically, the entity would agree to compensate the airport sponsor for the easement. An easement may also be reserved by the entity through a deed, if it is conveying property to the airport sponsor (see Deed Restriction in this section). MODIFICATIONS AND TERMINATION An easement can be voluntarily modified or terminated by the mutual agreement of all parties. An easement may also be terminated according to the terms stipulated in the easement agreement.

103 ACRP Report 114: Guidebook for Through-The-Fence Operations CONSIDERATIONS An easement is, in some ways, an appropriate fit for TTF agreements, as it grants a TTF entity the right to access airport land. It also gives the entity an interest in real property. However, an airport sponsor may not favor an easement because the instrument’s purpose does not easily fit with the airport sponsor’s typical desire to impose certain obligations on the entity and the TTF property (i.e., require compliance with primary management and compliance documents) and an easement into perpetuity does not provide the airport sponsor with a reasonable planning horizon. LEASE DEFINITION AND PURPOSE A lease is an interest in land that gives its holder a right to use and occupy real property. It is effectuated by a lease agreement wherein an owner (or tenant) conveys to a tenant (or subtenant) certain rights to use and occupy land and/or improvements in exchange for payment of rents and fees. The term of a lease is usually for a fixed period and may include renewal opportunities. EXECUTION A lease would be negotiated and executed by voluntary agreement of the parties. A lease should be recorded with the County Clerk and Recorder in the real property records. MODIFICATIONS AND TERMINATION A lease can be voluntarily modified or terminated by the mutual agreement of all parties. A lease may also be terminated according to the terms stipulated in the agreement. CONSIDERATIONS A lease is an awkward fit for TTF operations because the airport sponsor is not typically leasing airport land and/or improvements to the TTF entity (i.e., the airport sponsor is typically providing TTF access and the right to use the airport in common with others). While a TTF agreement conveys a right of access, it typically does not give the entity the right to exclusively occupy airport land and/or improvements, a hallmark of a lease agreement. However, a lease could be a good instrument to consider if, for example, an on-airport taxilane is being used exclusively by a TTF entity, or if a TTF agreement is part of a broader lease of airport land and/or improvements to a TTF entity. As with an easement, a lease may not be the best instrument to impose conditions on the entity’s use of the TTF property. LICENSE/PERMIT DEFINITION AND PURPOSE A license/permit is a grant of permission to a person to take certain actions that would otherwise be unlawful. A license/permit may be for a fixed period or it may be revocable “at will.” It may also include provisions granting certain rights, responsibilities, and/or obligations to the parties. It is distinguished from a lease or easement appurtenant because it is granted to an individual person or persons, rather than a property, and therefore does not “run with the land” (i.e., it would not apply to the future owners of TTF property). EXECUTION A license/permit may be a standard form used by the airport sponsor or negotiated between the parties. Licenses/permits typically include a requirement for the TTF entity to compensate the airport sponsor for TTF access.

ACRP Report 114: Guidebook for Through-The-Fence Operations104 MODIFICATIONS AND TERMINATION A revocable license/permit may be modified or terminated at the will of the airport sponsor. Other types of licenses/permits may include provisions that govern modification and termination. CONSIDERATIONS A revocable license/permit gives an airport sponsor a great deal of flexibility. However, it is unlikely to provide a TTF entity with the assurances (relating to term and use) it desires. Therefore, a license/permit with provisions regarding the rights, responsibilities, and obligations of the parties is likely to be more appropriate. Such a license/permit would enable the parties to agree on a variety of terms and conditions to govern the TTF operation. However, it may not provide the entity with the protections that are as certain as those effectuated by real estate instruments. CONTRACT DEFINITION AND PURPOSE A contract is an agreement between two or more parties creating rights, responsibilities, and obligations that are enforceable at law. A contract may relate to any issue including real property. EXECUTION A contract would be negotiated and executed voluntarily by the parties. Under the terms and conditions of a TTF contract, an airport sponsor would grant TTF access in exchange for rents, fees, and/or other promises from the TTF entity. MODIFICATIONS AND TERMINATION A contract may be modified or terminated by the mutual agreement of all parties. A contract may also be terminated in accordance with the terms and conditions stipulated in the contract. CONSIDERATIONS A contract provides maximum flexibility to the airport sponsor and the TTF entity. In concept, a detailed license/permit is like a contract (see License/Permit in this section) as similar considerations typically apply. OTHER TTF AGREEMENT CONSIDERATIONS Airport sponsor should include in TTF agreements a first right of refusal to allow the airport sponsor to purchase the TTF property should the TTF entity place the TTF property for sale. The inclusion of this right would facilitate a future move the fence strategy by the airport sponsor to eliminate a TTF property. However, AIP funds may be required to implement this strategy. Airport sponsors that enter into a TTF agreement with an HOA (versus individual development and use of residential TTF property to ensure that the CC&Rs are consistent with the agreement and the airport’s primary management and compliance documents. The CC&Rs can be a powerful tool that HOAs can use to enforce the terms and conditions of the agreement. residential TTF entities) should review the HOA’s CC&Rs which control the

105 ACRP Report 114: Guidebook for Through-The-Fence Operations 6.6 TTF AGREEMENT TERMS AND CONDITIONS Section 136 stipulates that a TTF agreement for residential TTF activities shall be in writing and that such an agreement shall “prescribe the rights, responsibilities, charges, duration, and other terms” the airport sponsor deems necessary. As indicated throughout this guidebook, this would be considered a best practice for all types of TTF activities. A discussion of the most common terms and conditions associated with a contractual agreement that grants TTF access rights for conducting TTF operations and/or engaging in TTF activities follows. These terms and conditions are designed for a contract, but could be incorporated into other types of TTF agreements. INTRODUCTORY CLAUSE The purpose of the introductory clause is to provide a brief introduction to the TTF agreement. Ideally, this section should identify the parties to the agreement, what the agreement is generally about, and when the agreement will become effective. PARTIES TO THE TTF AGREEMENT TTF agreements typically involve two parties: the airport sponsor (or an entity authorized to enter into agreements on behalf of the airport sponsor) and the TTF entity. In this provision, use full legal names and a description of the type of entity and associated state of organization (e.g., “a corporation organized and existing under the laws of the State of Colorado”). Additionally, a shortened defined term for each party to be used throughout the balance of the agreement (e.g., Airport Sponsor, ABC Company) should be included. Typically, the airport sponsor should be identified by the name of the entity (e.g., City of XYZ) rather than the name of the airport (e.g., XYZ Airport). EFFECTIVE DATE OF THE TTF AGREEMENT The effective date is typically the date of the final signature or some other date agreed upon by the parties, which can be before or after the TTF agreement is signed. This date is significant because it is the date when the rights, responsibilities, and obligations of the parties become enforceable. The parties may decide to postpone the effective date until the occurrence of a specific event, such as the construction of improvements (e.g., TTF access points). RECITALS The purpose of the recitals section is to set the stage for the TTF agreement. This section should identify basic facts that provide context for the agreement and aid in subsequent interpretation. The recitals are not binding and should not include substantive terms and conditions. However, the recitals can (and should) be incorporated into the agreement by reference. SPONSORSHIP OF PROPERTIES The recitals should identify the properties owned by the airport sponsor and the TTF entity by physical addresses and any common names utilized for the parties (e.g., XYZ Airport). OTHER AGREEMENTS CONCERNING TTF OPERATIONS If any other legal instruments (e.g., deeds, leases, easements, licenses, permits, or other agreements) related to the TTF operations are addressed in the TTF agreement, such instruments should be identified by the exact title of the instrument, the parties, and the effective date within the recitals. For example, TTF access may be addressed in a deed or easement, which should be referenced in a subsequent agreement or contract specifically defining the conditions of access.

ACRP Report 114: Guidebook for Through-The-Fence Operations106 AUTHORITY FOR PERMITTING TTF OPERATIONS Generally, the authority of an airport sponsor to enter into a TTF agreement will derive from the entity’s powers as the property owner and as the airport sponsor, and may also be exercised pursuant to an express state statute, local ordinance, or airport management and compliance document. The recitals should describe the applicable authority. APPLICATION OF AIRPORT SPONSOR ASSURANCES The recitals should include a provision that indicates the applicability of the Airport Sponsor Assurances. This puts the parties and the reader on notice that federal obligations are applicable and that the obligations may affect the TTF agreement pursuant to a subordination clause or similar provision. Because of the importance of this provision, airport sponsors can face severe penalties if the agreement is construed by FAA to create a conflict with the assurances. Within this context, the Airport Sponsor Assurances and subordination are typically addressed in more detail in the main body of the agreement. PURPOSE OF THE TTF AGREEMENT The recitals should describe the motivations and purposes of each party in entering into the TTF agreement (e.g., “to authorize access to the airport from TTF property at a defined TTF access point in exchange for payment of fees and compliance with other terms of agreement by TTF entity”). The permitted TTF activities of the entity should also be identified (e.g., residential, commercial aeronautical, non-commercial aeronautical, non-aeronautical, and governmental/military). DEFINITIONS Defined terms should be included as deemed necessary and appropriate. Defined terms (e.g., Airport Sponsor, TTF Entity, TTF Property, etc.) may be established throughout the text by including a definition in a parenthetical directly following the first time the term occurs in the TTF agreement. For more detailed agreements, it may be appropriate to include a dedicated definitions section. NO INTEREST IN REAL PROPERTY (IF APPLICABLE) If the TTF agreement is in the form of a contract, license, or permit, then a declaration that no part of the agreement creates any interest in real property, and specifically does not confer any interest in the airport to the TTF entity needs to be included in the agreement. This can be important because the holder of an interest in real property has certain rights that a party to a contract, license, or permit or license may not. It is particularly important for airport sponsors of federally obligated airports because Assurance 5 (Preserving Rights and Powers) prohibits an airport sponsor from encumbering an airport without FAA consent. SUBORDINATION While it does not matter where this provision is located in the TTF agreement, a provision declaring that the agreement is subordinate to the Airport Sponsor Assurances and similar and related federal obligations must be included in the agreement. This is critical for ensuring compliance with Assurance 5 (Preserving Rights and Powers). Even if an airport sponsor is not subject to the assurances, it is advisable to include a clause that subordinates the agreement to any existing or future agreements between the airport sponsor and the federal and state government. The TTF entity should agree to comply with any actions that the federal or state government deems necessary for the airport sponsor to achieve compliance with the assurances, other federal and state obligations, and applicable regulatory measures. The airport sponsor should also consider including the unilateral right to amend or terminate the agreement at any time, if necessary for the airport sponsor to remain in compliance with the assurances, other federal and state obligations, and applicable regulatory measures.

107ACRP Report 114: Guidebook for Through-The-Fence Operations TERM OF AGREEMENT START DATE, END DATE, AND DURATION The start date of the TTF agreement will often be the effective date, but it may be later as well. The duration of the agreement should be for a specified term. The FAA discourages perpetual TTF agreements and the airport sponsor may not favor a perpetual agreement that limits the future growth and development potential of the airport. The parties may wish to define the end date as well. The term may also be contingent upon the continuing existence of a certain condition such as a particular use of the TTF property by the TTF entity. investment been made on the airport. Furthermore, as discussed in the CGL, the FAA’s review of a residential TTF agreement is only valid for a period not to exceed 20 years. Therefore, airport sponsors should not enter into a TTF agreement, regardless of the type of TTF activity, having a base term greater than 20 years. RENEWAL OPTIONS AND NOTICE REQUIREMENTS Provisions regarding options to renew the agreement may be desirable. Such provisions should include the terms under which renewal is possible (e.g., TTF entity is in good standing and not in breach of any part of the TTF agreement) and whether the renewal will be at the option of either party and/or if the renewal will be subject to negotiation. If one of the parties (usually the TTF entity) will have an option to renew, this provision should also include any notice requirements that will be required to exercise the option and whether and how rents and fees will be adjusted. TTF ACCESS RIGHTS The purpose of this section is to provide detailed information about the mechanics and scope of TTF access. The ambiguity about what types of situations and/or circumstances constitute a violation of the TTF agreement can be avoided by providing good (detailed and thorough) descriptions in this section. SUBJECT PROPERTIES The addresses and common names of the subject properties have already been identified in the recitals and this provision can refer back to the descriptions provided in that section. Additionally, this provision should include a reference to full legal descriptions which are typically included as attachments or exhibits to the agreement. To remain consistent with the requirement stipulated in Section 136 for residential TTF activities and consistent with best practices for all other types of TTF activities, this provision should stipulate that the TTF entity must prohibit access to the airport by the owners/users of other properties through the subject property. TTF ACCESS POINTS The description of the TTF access points should include the common names that are used for the gates, taxilanes, or taxiways (e.g., Taxiway A) that facilitate TTF access to the airport. A detailed graphic depiction of the TTF access points is recommended and such a depiction can (and should) be included as an attachment or exhibit to the TTF agreement. It is important to note that the FAA (as discussed in Order 5190.6B) discourages a term that is based on the full depreciation of any investment made on the TTF property, as would be the case had the

ACRP Report 114: Guidebook for Through-The-Fence Operations108 METHOD OF TTF ACCESS AND ACCESS CONTROLS The description of the method of TTF access should include detailed information about the way the TTF entity will access the airport (e.g., gate cards, access codes, etc.). AIRCRAFT TTF ACCESS RIGHTS The TTF agreement should identify the specific aircraft permitted to utilize the TTF access points, consistent with the TTF activities permitted in the agreement. For residential and non-commercial aeronautical TTF activities, this may be limited to aircraft owned by the TTF entity and such aircraft may be identified explicitly by make, model, and registration number. For commercial aeronautical, non-aeronautical, or governmental/military TTF activities, the aircraft permitted to utilize TTF access points may be identified more broadly (e.g., aircraft manufactured by a TTF entity, aircraft operated by government/military agency, etc.). If the airport’s infrastructure has specific weight restrictions relating to the weight bearing capacities of the airport’s runways and taxiways, a provision prohibiting such use by aircraft exceeding the weight restrictions should be included in the agreement as well. VEHICLE AND PEDESTRIAN TTF ACCESS RIGHTS The description should identify the types of vehicles (and pedestrians – if allowed) that are permitted to utilize TTF access points, the specific gates and roadways for TTF access, the acceptable purposes (and hours) for access, and whether prior permission is needed from the airport sponsor. For example, if the TTF entity is responsible for removing snow from the on-airport taxilanes connecting the TTF property to the airport’s airside infrastructure, the TTF agreement may expressly permit access to the airport property for the purposes of snow removal with prior approval from the airport sponsor. It is significant to note that Order 5190.6B recommends that airport sponsors explicitly restrict TTF access to aircraft only. PERIODS OF ACCESS AND EXCLUSIONS FOR SPECIAL CIRCUMSTANCES The description of the periods when TTF access is allowed should include specific times (e.g., time of day, day of the week, etc.) or specific events (e.g., special events – like air shows, emergency situations and/or circumstances, etc.). If an airport sponsor has mandatory curfews (based on an approved 14 CFR Part 161 study) or voluntary curfews, a provision prohibiting use of the airport during these curfews should be included in the TTF agreement as well. ATTACHMENTS To reduce ambiguity, it may be helpful to include various attachments including a full legal description of the properties, as well as the ALP, and other relevant plans, maps, or photographs. Often times, a detailed graphic depiction will be more helpful than a narrative description. TTF ACTIVITIES In this section, an airport sponsor can place restrictions on the activities permitted on a TTF property in exchange for granting TTF access rights to a TTF entity. PERMITTED TTF ACTIVITIES The TTF agreement should clearly identify the permitted TTF activities on the TTF property (e.g., residential, commercial aeronautical, non-commercial aeronautical, non-aeronautical, and/or governmental/military). Permitted activities should be described in detail (e.g., “residential” includes single or multi-family dwellings, duplexes, apartments, primary and secondary homes, etc.).

109 ACRP Report 114: Guidebook for Through-The-Fence Operations PROHIBITED AND/OR RESTRICTED TTF ACTIVITIES The TTF agreement should clearly identify in detail the prohibited and/or restricted TTF activities on the TTF property (e.g., retail fuel sales, commercial aeronautical, or residential). Special consideration should be given to clearly delineating those TTF activities that could potentially fall into the permitted “and” the prohibited categories (e.g., the use of aircraft for business purposes could be considered a commercial or a non-commercial activity). RIGHTS OR LIMITATIONS RELATING TO FUELING The airport sponsor may allow a TTF entity to fuel aircraft on the entity’s private property or may determine that it is in the best interest of the airport sponsor to require, as a condition of granting TTF access, that the entity refrain from engaging in fueling activities on the TTF property. It is important to note that a TTF entity is not protected under the Airport Sponsor Assurances and therefore has no right, enforceable by the FAA, to self- fuel (or engage in any form of self-service for that matter). APPLICATION OF ORDINANCES, POLICIES, STANDARDS, RULES, AND REGULATIONS ON TTF PROPERTY Any applicable ordinances, policies, standards, rules, and regulations (e.g., the airport’s primary management and compliance documents, the airport sponsor’s regulatory measures, and/or the requirements of other government agencies having jurisdiction) should be referenced using accurate and complete citations including a description of the extent to which such ordinances, policies, standards, rules, and regulations are applicable to TTF operations. These authorities, which could be applicable to TTF operations, are in addition to those that apply when a TTF entity is operating on the airport. These documents can (and should) be incorporated into the TTF agreement by reference and would be enforceable under the agreement. Additionally, a provision can (and should) be included in this section that explains which version of the documents applies (e.g., whether the version which exists at time of execution of the agreement applies or the current version which exists at the time of the interpretation applies). TTF RENTS AND FEES The TTF agreement should require that the TTF entity pay appropriate rents and fees for the right to access and use the airport. This ensures that the airport sponsor recovers the costs associated with providing TTF access and maintaining compliance with the federal and state obligations and helps minimize the potential for conflicts, complaints, and disputes with on-airport operators, tenants, and users relating to economic nondiscrimination. In addition to identifying the specific rents and fees and associated due dates, other terms such as adjustments, late fees, taxes, and assessments should be addressed as well. This provision is required for residential TTF activities to maintain compliance with Section 136. However, this provision should be included in all TTF agreements. AMOUNT AND METHOD OF CALCULATION The type of rents and fees should be described (e.g., fixed, variable, other, etc.) and, if applicable, the method for calculating the rents and fees should be described as well (e.g., based on square footage of land and improvements associated with TTF property or on a per use basis of TTF access points, as discussed in Section 6.4: Rents and Fees). If rents and fees are variable, a minimum annual guarantee might be included in the TTF agreement. Some agreements may outline a fixed and a variable rents and fees structure. The parties may agree to other fees (e.g., fuel flowage, percentage of revenue from commercial activities, etc.). In addition to identifying such other fees, the method for calculating the amount and the frequency for making adjustments should be described in this provision. Section 136 requires that TTF agreements permitting residential TTF access stipulate that the TTF property can only be utilized for residential TTF activities and that commercial aeronautical TTF activities (including the sale of fuel) are prohibited.

ACRP Report 114: Guidebook for Through-The-Fence Operations110 WHEN AND WHERE RENTS AND FEES ARE DUE For simplicity and predictability, rents and fees should generally be due and payable (without invoice) at regular intervals (e.g., monthly, quarterly, annually, etc.). If specific methods of payment are desired (e.g., direct bank transfer), such terms should be included. Additionally, the location of payment (e.g., the address of the airport administrative offices or some other designated address) should be stipulated. ADJUSTMENTS TO RENTS AND FEES It is advisable to include terms that provide for escalation of the rents and fees over time. For example, rents and fees can be adjusted based on the changes to rental rates for on-airport land and/or improvements or fees can be adjusted based on the changes to an index [e.g., Consumer Price Index (CPI)]. The parties may agree to negotiate rents and fees on a periodic basis and/or at the time an agreement is renewed (if permitted). LATE CHARGES To encourage the timely payment of rents and fees, the TTF agreement may impose late charges. If so, this provision should include a description of the circumstances under which a payment would be considered late and whether notice is required before a late charge can be applied. REMITTANCE AGREEMENTS The parties may agree that the TTF entity should collect rents and fees from others (e.g., overnight parking fees for transient users) and remit the rents and fees to the airport sponsor. In this case, the TTF agreement should describe the reporting documentation required, the frequency of remittance, the amount the entity may retain (if any), and the repercussions for failing to remit the amount due (to the airport sponsor) on a timely basis. APPLICATION OF TAXES AND OTHER ASSESSMENTS Typically, TTF entities are private parties and the tax exemption(s) that apply to airport property do not apply to TTF property. As such, it may be helpful to clarify that the TTF entity is liable for the payment of taxes and/or assessments relating to the TTF property. INFRASTRUCTURE AND/OR IMPROVEMENTS INFRASTRUCTURE AND/OR IMPROVEMENTS TO BE COMPLETED TTF agreements may involve the construction of new infrastructure and/or improvements on and/or off the airport. This provision should describe the type and location of the infrastructure and/or improvements to be constructed (e.g., taxilanes, security fences, gates, etc.). Attachments or exhibits may be helpful to graphically depict the type and location of existing and proposed (or new) infrastructure and/or improvements. RESPONSIBILITY FOR CONSTRUCTION OF INFRASTRUCTURE AND/OR IMPROVEMENTS New infrastructure and/or improvements may be constructed by the TTF entity (on and/or off the airport) or the airport sponsor (on-airport). This provision should identify the party who is responsible for constructing each component of the new infrastructure and/or improvements. Particular attention needs to be paid to infrastructure and/or improvements that are going to be constructed on the airport property line (e.g., security fencing, access gates, signage, lighting, etc.). Typically, the airport sponsor oversees any construction taking place on the airport, even if the cost of construction is being borne by the TTF entity (discussed further in this section). This provision helps ensure compliance with Section 136 for residential TTF agreements. However, this provision should be included in all TTF agreements.

111 ACRP Report 114: Guidebook for Through-The-Fence Operations RESPONSIBILITY FOR COSTS OF CONSTRUCTION OF INFRASTRUCTURE AND/OR IMPROVEMENTS The party who pays the costs of construction may be different than the party who is responsible for construction. This provision should identify the responsibilities of each party. SPONSORSHIP OF INFRASTRUCTURE AND/OR IMPROVEMENTS The sponsorship of infrastructure and/or improvements should be identified, especially if the infrastructure and/or improvements are constructed and paid for by different parties. However, the TTF entity should not (in any case) be identified as the sponsor of on-airport infrastructure and/or improvements. TAX TREATMENT OF INFRASTRUCTURE AND/OR IMPROVEMENTS It may be desirable to include a provision regarding the tax treatment of infrastructure and/or improvements (e.g., the TTF entity will pay the taxes assessed on the infrastructure and/or improvements located on the TTF property). DESIGN AND CONSTRUCTION PROCESS A description of the design and construction process should be included in the TTF agreement. The elements of the process may include, for example, the airport sponsor’s right to approve construction plans, a budget and payment (or draw-down) schedule, delivery of “as-built” plans to the airport sponsor, and a prohibition on interference with airport activities during construction. If the airport sponsor has development standards (as REQUIRED DISCLOSURES AND CERTIFICATIONS The parties may desire to require certain financial disclosures and certifications to maintain transparency. For example, the parties may agree to require that the TTF entity describe the total value and cost of all investments made in connection with the TTF operation. MAINTENANCE AND REPAIR OF PREMISES This is another key area in which airport sponsors may exert control over TTF property in return for granting TTF access. These provisions are necessary to ensure the safety, utility, and efficiency of the airport. TTF ENTITY’S RESPONSIBILITIES FOR MAINTENANCE AND REPAIR OF TTF PROPERTY The description of the TTF entity’s responsibility for maintenance and repair of its own property (including infrastructure and/or improvements) can (and should) include measurable standards. Requirements may include: snow removal is required when snow reaches a certain level; vegetation must be kept below a certain height; explosive materials may not be stored on the property. If new infrastructure and/or improvements will be constructed under the TTF agreement, it is advisable to specify that the TTF entity will be responsible for the maintenance and repair of such infrastructure and/or improvements on the TTF property. AIRPORT SPONSOR’S RIGHT TO ENFORCE MAINTENANCE AND REPAIR OBLIGATIONS The airport sponsor may want to include a provision giving it the right to order the TTF entity to carry out certain types of maintenance and repair and/or prevent the construction of infrastructure and/or improvements and other structures and/or the growth of natural objects that would constitute a hazard to air navigation. Such a provision may include notice requirements, cure periods, and the airport sponsor may have the right to enter the TTF property and perform any required actions, at the TTF entity’s risk, cost, and expense, if the entity fails to comply. discussed in Chapter 4: Airport Planning, Management, and Compliance Tools and this chapter), the agreement should require compliance with this document.

ACRP Report 114: Guidebook for Through-The-Fence Operations112 AIRPORT SPONSOR’S DUTY TO KEEP THE AIRPORT OPEN The airport sponsor may agree that it has a duty to act in good faith to keep the airport open, subject to certain limitations. Additionally, it may be desirable to include provisions that describe the airport sponsor’s duty to maintain the infrastructure and/or improvements that are essential to TTF operations (e.g., the airport sponsor is responsible for maintaining the taxilanes from the fence line to the airport airside infrastructure). In some cases, the parties may agree that the TTF entity will pay a fee to the airport sponsor to help recover the costs associated airport sponsor should reserve the right to close the airport temporarily for emergencies, special events, or other situations without incurring any liability to the entity or being responsible for any damages that may result. TTF ENTITY’S OBLIGATIONS The TTF entity will have obligations that extend beyond the responsibilities described previously. REFRAIN FROM DAMAGING AIRPORT PROPERTY This provision would prohibit the TTF entity from engaging in any acts or practices that could damage airport property and/or that necessitate the repair of airport property, normal wear and tear excluded. This provision should also prohibit the entity from causing a nuisance. FUELING AND FUEL STORAGE ARRANGEMENTS A variety of fueling and fuel storage arrangements may be available to the parties. This provision should clarify the TTF’s entity’s rights, responsibilities, and obligations (if any) in this area. This is particularly important if the airport sponsor wants to regulate fueling and fuel storage in a manner other than that prescribed in the airport’s policies, standards, rules, and regulations. PAYMENT OF UTILITIES The TTF entity should be responsible for the costs of utilities on the TTF property unless otherwise agreed upon by the parties. COMPLIANCE WITH REGULATORY MEASURES The TTF agreement should include a general “compliance with regulatory measures” provision that requires compliance with all applicable regulatory measures, but specifically references any key laws and regulations (e.g., FAA and Transportation Safety Administration regulations, civil rights, economic nondiscrimination, etc.). COMPLIANCE WITH 14 CFR PART 77 The notice requirements for proposed construction and the standards for determining whether a structure is considered an obstruction or poses a hazard to air navigation are established in Part 77. It is advisable to include a provision that makes compliance with the notice requirements of Part 77 mandatory, clarifies that compliance with the notice requirements is the responsibility of the TTF entity (for infrastructure and/or improvements on the TTF property), and explicitly prohibits structures and natural objects which, as determined by the FAA, constitute an obstruction and/or are considered a hazard to air navigation. COMPLIANCE WITH SIGNAGE RESTRICTIONS The TTF agreement should specify whether signage is subject to airport–specific requirements (if signage is addressed in the airport’s development standards) or to a local sign code. The airport sponsor may wish to impose additional restrictions regarding number, type, size, design, or location of signs on the TTF property. The agreement may also give the airport sponsor the right to approve any signage. with maintaining and repairing on-airport infrastructure and/or improvements that facilitate TTF access. The

113 ACRP Report 114: Guidebook for Through-The-Fence Operations LICENSES AND CERTIFICATES This provision would require the TTF entity to maintain any necessary licenses, certificates, permits, or other authorizations required for its operations. Such authorizations may be required from the FAA, SAO, or other governmental entities. Additionally, this provision would require that the entity keep records of such authorizations on site and available for inspection at all times. NON-EXCLUSIVE RIGHT TO CONDUCT AERONAUTICAL ACTIVITIES The TTF agreement should include a declaration that it does not confer an exclusive right to the TTF entity to engage in any aeronautical activity. This is the same provision that an airport sponsor would include in any on- airport agreement. RIGHT OF AIRCRAFT TO OVERFLY AND IMPACT TTF PROPERTY The TTF agreement should include the TTF entity’s express permission for aircraft to overfly and impact the TTF property (i.e., to cause noise and other impacts) and the entity should release the airport sponsor from any liabilities that may be associated with any impacts on the property. In the alternative, the parties could execute an avigation easement that would accomplish these objectives. The avigation easement would be separate from, and survive, the TTF agreement and run with the land, regardless of the existence of TTF access rights. TRANSFER, SUBLEASE, AND ASSIGNMENT A TTF entity may desire to transfer or sublease the TTF property, or to assign its rights in the property to another party, during the term of the TTF agreement. The airport sponsor may refuse to permit the transfer, sublease, and/or assignment of TTF access rights as a condition of granting access to the airport. In other words, the agreement would only be valid for a specific TTF entity and null and void for any other entity. On rare occasions, the sponsorship of the airport may change. As such, it is important to address the terms by which the agreement may survive such actions — if it survives at all — and whether any notification or approvals will be required. ASSIGNMENT AND SUBLEASE CONDITIONS The TTF entity might be entirely prohibited from assigning its rights, responsibilities, and obligations under the TTF agreement to another party, whether by subleasing the TTF property or assigning the agreement. Alternatively, an airport sponsor might agree to allowing assignment or subleasing if the assignee or sublessee is subject to the prior approval of the airport sponsor. ACTIONS CONSTITUTING ASSIGNMENT Assignment may occur in a number of ways. The TTF agreement should identify the actions that would constitute an assignment of the agreement. This is particularly important if the airport sponsor wants to automatically terminate the agreement if the TTF property is sold and/or the TTF entity is acquired. The agreement should specify the effect such actions would have on the property (e.g., would partial interest in the property be transferred to another party, would the property be sub-divided, etc.). EFFECT OF CHANGE OF SPONSORSHIP OF THE AIRPORT While airports are likely to remain under stable sponsorship for extended periods of time, changes do occur (e.g., the creation and transfer of sponsorship to an airport authority). The TTF agreement should specify whether future sponsors of the airport will be bound by the agreement.

ACRP Report 114: Guidebook for Through-The-Fence Operations114 RIGHT OF INSPECTION In this section, the rights of the airport sponsor and government entities to enter the TTF property to ensure compliance with the TTF agreement; the airport’s policies, standards, rules and regulations; and applicable regulatory measures should be addressed. Typically, this provision imposes notice requirements and time restrictions for conducting such inspections. PARTIES WITH RIGHT OF INSPECTION AND PERMISSIBLE PURPOSES FOR INSPECTION Parties with the right to inspect the TTF property may include the airport sponsor and its agents and representatives of the FAA and SAO. The permissible purpose for conducting inspections is to determine whether the TTF entity is complying with the terms and conditions of the TTF agreement; the airport’s policies, standards, rules, and regulations; and/or applicable regulatory measures. PERMISSIBLE INSPECTION TIMES AND NOTICE REQUIREMENTS Permissible times of access may be limited to, for example, weekdays and the airport sponsor’s business hours. Additionally, the parties may agree that prior notice will be provided in a certain form (e.g., 24 hours advance written notice). The TTF agreement should include exceptions for waiving notice requirements (e.g., in an emergency). PERFORMANCE OF MAINTENANCE AND REPAIRS REQUIRED BY INSPECTORS For the inspections to be effective, corrective action must be taken. This provision requires the TTF entity to comply with any orders from the airport sponsor and/or government entities arising from the inspections. It may be helpful to define an order (e.g., written notice with explanation of the violation from an inspector) and outline the timeframe for the entity to comply with the order (i.e., commence and complete the corrective action). INSPECTION IS NOT CAUSE FOR TERMINATION OR CLAIM OF INTERFERENCE To conduct an inspection, the airport sponsor or other parties will need to enter the TTF property and potentially order the TTF entity to take corrective action. As such, it may be helpful to emphasize that inspection activities fall within the terms and conditions of the TTF agreement and such activities do not give rise to any causes of action that may benefit the entity. AIRPORT SPONSOR ’S RESERVATION OF RIGHTS NOT RESPONSIBLE FOR AIRPORT CLOSURES OR WEATHER While the airport sponsor may have an obligation to make good faith efforts to keep the airport open (as discussed previously), it is advisable to include a provision that specifies that the airport sponsor is not responsible for airport closures or the inability of the TTF entity to operate aircraft due to weather or other acts of nature. For example, the airport sponsor may want to state that it makes no assurances that the taxilane/taxiway by which the entity gains access to the airport will be usable at all times. RIGHT TO LIMIT ACTIVITIES OR CONSTRUCTION THAT WOULD AFFECT SAFETY This provision compliments the requirement that the TTF entity must comply with Part 77 notice requirements and standards for determining whether a structure constitutes an obstruction and/or poses a hazard to air navigation. It may be desirable to include an additional provision that gives the airport sponsor a separate right to prohibit structures or activities that interfere with the safe operation of the airport.

115 ACRP Report 114: Guidebook for Through-The-Fence Operations RIGHT TO DEVELOP THE AIRPORT Airport sponsors will often have plans for the future development of the airport (e.g., modifying or adding aprons, taxiways, or runways or making other improvements at the airport). Accordingly, it is advisable for the airport sponsor to convey its right to undertake such development and limit the TTF entity’s ability to challenge it. If a project is currently being pursued or the airport sponsor is planning to pursue a project at or near the time the TTF agreement may be executed, the project should be identified and any special access or non-interference provisions that may be appropriate considering the situation and/or circumstances should be included in the agreement. RIGHT TO IMPLEMENT POLICIES, STANDARDS, RULES, AND REGULATIONS This is a catch-all provision that is designed to preserve the airport sponsor’s right to govern the airport. More specifically, in the TTF agreement, the airport sponsor’s right to develop, implement, and enforce the airport’s policies, standards, rules, and regulations and take other actions that may have an impact on the TTF entity should be stipulated. Additionally, the parties may agree that prior notice will be provided to the TTF entity before such documents or changes go into effect. RIGHTS DURING NATIONAL EMERGENCIES To ensure consistency with the Airport Sponsor Assurances (if the airport has a National Emergency Use Provision), the TTF agreement needs to include a provision granting the airport sponsor the right to lease or transfer all or part of the airport property to the U.S. government and that any provisions of the agreement that conflict with this requirement would be suspended or terminated. HOLD HARMLESS, INDEMNIFICATION, AND INSURANCE The provisions in this section serve to allocate risk between the parties. USE OF AIRPORT PROPERTY AT TTF ENTITY’S OWN RISK The airport sponsor should declare that it is not liable for loss or injury to persons or property that occurs arising out of the TTF entity’s use of the airport. The TTF agreement may also include language that the airport sponsor is not responsible for the entity’s personal or real property, employees, customers, or other persons. AIRPORT SPONSOR IS HELD HARMLESS In this provision, the airport sponsor should declare that it is held harmless from all liabilities arising from injury or death to persons, damage to property, or claims for infringement of intellectual property arising out of the TTF entity’s use of the airport, with exception of acts of negligence by the airport sponsor. The parties may wish to be specific about the terms of indemnification. Some of the more common terms include: Costs covered by hold harmless/indemnification provisions – Although the general language should cover the costs involved in defending the airport sponsor against any claims brought against it, it may be helpful to be more specific about some of the more frequently encountered costs that could be incurred. Airport sponsor’s ability to approve counsel – Airport sponsor may wish to reserve the right to approve the TTF entity’s choice of counsel used to defend the airport sponsor pursuant to the indemnification provision. Airport sponsor’s ability to elect to participate in legal defense of claims – Airport sponsor may wish to include a provision that gives it the option to participate to ensure against an inadequate defense and whether the airport sponsor will bear costs of such a defense. Airport sponsor’s right to prompt and reasonable notice – With regard to indemnified claims, this helps ensure that the airport sponsor will be kept informed. With regards to claims against the airport sponsor for negligence, this places some restrictions on the claims that could be brought against it alleging negligence. The parties may agree that the indemnification provisions survive the termination of the TTF agreement.

ACRP Report 114: Guidebook for Through-The-Fence Operations116 REIMBURSING THE AIRPORT SPONSOR FOR PENALTIES The airport sponsor may wish to require that any penalties imposed on it resulting from the TTF entity’s acts or inactions will be the responsibility of the entity. Such a provision should specify whether the fault of the TTF entity needs to be complete before this provision applies or if a partial fault will result in a partial reimbursement. INSURANCE REQUIREMENTS It is common for an airport sponsor to require that a TTF entity carry insurance that meets certain requirements. For example, a TTF agreement may require that the entity carry insurance as statutorily required by relevant workers compensation legislation. Depending on the type of TTF activity, a TTF entity may be required to carry commercial general liability, hangar keeper’s legal liability, aircraft and passenger liability, and business automobile liability. Minimum insurance coverages and the specific requirements for certificates of insurance should be identified. Often times, an airport sponsor will be listed as an additional insured. In the event a required policy is modified or cancelled, notice should be provided to the airport sponsor. Insurance requirements and related specifications can be included as an attachment to the agreement. WAIVER OF INSURANCE SUBROGATION RIGHTS The parties may desire to release each other from liability from any loss or damage to the property of the other party to the extent that such loss would be covered insurance, even if the other party caused the loss. DEFAULT AND TERMINATION A dispute over whether or not an event of default occurred, such that one of the parties may terminate the TTF agreement, is a significant conflict. While a dispute may start with a general reference to this section based on the proposition that a violation of any term or condition of the agreement is a cause for default, ultimately, the debate will focus on the alleged violation of a specific term or condition. Within this context, precise descriptions of the events that constitute a default will help reduce confusion and minimize disputes. It is important to note that some of the events giving rise to a party’s right to terminate the agreement are events of default, while other events are not caused by either of the parties . EVENTS GIVING RISE TO AIRPORT SPONSOR’S RIGHT TO TERMINATE TTF entity’s violation of the TTF agreement including permitted TTF activities TTF entity’s failure to pay the required rents and fees or maintain required insurance coverages TTF entity’s loss of rights necessary for proper conduct of TTF activities TTF entity’s abandonment of the TTF property Airport closure or substantial closure compelled by lawful authority (e.g., court injunction) Declaration that the TTF operations are inconsistent with federal and state obligations EVENTS GIVING RISE TO TTF ENTITY’S RIGHT TO TERMINATE Airport sponsor’s failure to provide reasonable means for TTF access Airport sponsor’s violations of other provisions of the TTF agreement Assumption by the U.S. government of the operation and/or control of the airport Airport closure or substantial closure compelled by lawful authority Condemnation of the TTF property Declaration that TTF operations are inconsistent with Airport Sponsor Assurances

117 ACRP Report 114: Guidebook for Through-The-Fence Operations AT-WILL TERMINATION In addition to the events giving rise to termination, the parties may agree that either party may elect to terminate the TTF agreement with prior notice in a certain form (e.g., 30 days advance written notice). PROCEDURE FOR TERMINATION It is important to establish the timeframes and notice requirements for curing a default. For example, if a TTF entity fails to pay the annual fee(s) on the designated day, it is immediately in default. Alternatively, the TTF agreement could stipulate that the entity would not be in default immediately, but that it would only be in default if it fails to cure the default within a certain number of days after receiving written notice from the airport sponsor. It is also helpful to identify the forms of communication that will be given legal significance during the process (e.g., written notice will be provided via certified mail). It may be desirable to specify the timeframe that termination would be effective (e.g., 30 days after the default). EFFECT OF TERMINATION It may be helpful to describe the implications of termination. For example, if the TTF entity were the defaulting party, then the TTF agreement might require that the entity pay any outstanding fees. Generally, when the agreement expires, the TTF access rights granted to the TTF entity would expire as well. The agreement may also include a requirement that the entity must, upon termination of the agreement, promptly remove any personal property, aircraft, vehicles, equipment, or other items from the airport property. Additionally, if the agreement is in the form of a lease, it may be appropriate to require quiet surrender and identify holdover provisions and related penalties. ENVIRONMENTAL PROVISIONS USING, STORING, GENERATING, TREATING, AND/OR DISPOSING OF HAZARDOUS SUBSTANCES Federal, state, and local environmental laws and regulations can assign liability not only to the entities most directly involved with the pollution, but also to the entities who are indirectly involved (e.g., “transporters” or “arrangers”) under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA). As a result, the airport sponsor will want to limit the possibility of any pollution being attributed to it by prohibiting the TTF entity from using, storing, generating, treating, or disposing of hazardous substances on-airport or adjacent premises without the airport sponsor’s consent. COMPLIANCE WITH FEDERAL, STATE, AND LOCAL ENVIRONMENTAL LAWS AND REGULATIONS While the importance of including a general “compliance with laws and regulations” provision has already been discussed, it may be helpful to include a separate environmental compliance clause dedicated solely to this issue in the TTF agreement. A list of applicable federal laws and regulations includes, but is not limited to, CERCLA; Resources Conservation Act; Toxic Substances Control Act; Federal Insecticide, Fungicide, and Rodenticide Act; Clean Water Act; Clean Air Act; and Occupational Safety and Health Act. GENERAL PROVISIONS TTF ENTITY HAS NO AUTHORITY TO ACT AS AN AGENT OF AIRPORT SPONSOR This provision helps protect the airport sponsor from obligations or other liabilities that the TTF entity may attempt to assume on behalf of the airport sponsor. It also puts the entity on notice that it has no authority to act as an agent of the airport sponsor (i.e., that such activity is expressly prohibited).

ACRP Report 114: Guidebook for Through-The-Fence Operations118 TTF ENTITY HAS NO AUTHORITY TO CREATE LIENS AGAINST AIRPORT SPONSOR’S PROPERTY This provision stipulates that the TTF entity’s right to use the airport sponsor’s property is merely contractual (or, at best, less-than-fee interest in a lease) and that the entity may not create a lien against or otherwise obligate the airport sponsor’s property. EFFECT OF CONDEMNATION OF TTF PROPERTY If the TTF property is condemned, the parties should agree that the TTF agreement will be terminated. WAIVER OF ONE OBLIGATION DOES NOT CONSTITUTE A WAIVER OF OTHER OBLIGATIONS This provision defines the scope of a waiver. It may also be desirable to include provisions that specify the form in which a waiver must be made to be effective (e.g., written notice). THE AGREEMENT CREATES NO THIRD PARTY BENEFICIARIES This provision helps to ensure that only the TTF entity and the airport sponsor have rights, responsibilities, and obligations under the TTF agreement. TIME IS OF THE ESSENCE This provision encourages the timely completion of the responsibilities and obligations stated in the TTF agreement. If undue delay occurs, this provision can be cited to support the position that an action that is not completed in a timely manner can give rise to a violation of the terms and conditions of the agreement. AGREE TO EXECUTE DOCUMENTS This is a standard provision that requires the parties to take all reasonable steps to complete the execution of the TTF agreement and effectuate the terms, conditions, and intent of the agreement. CERTIFY THAT SIGNATORIES HAVE AUTHORITY TO EXECUTE This provision helps to ensure against a later challenge to the agreement based on formation grounds (i.e., predicated on the argument that the TTF agreement was never properly executed). COUNTERPARTS TO THE TTF AGREEMENT CONSTITUTE ORIGINALS This provision stipulates that signatures on separate pages, which may be necessary to transact business between parties in different locations or when transacting business via e-mail, are valid to execute the TTF agreement. INTERPRETIVE PROVISIONS The parties may agree to include terms and conditions that provide guidance in the case of future interpretive questions or conflict. For example, the parties may declare that captions and section numbers are for convenience only and should not aid in interpretation. Other potential provisions include agreed upon presumptions, the use of gender references, and the incorporation of recitals in the agreement. GOVERNING LAW This provision specifies the jurisdiction’s rules that will be applied in interpreting the TTF agreement. DISPUTE RESOLUTION The parties may desire to create an administrative process through which disputes between the parties could be resolved. This may entail a review of the dispute by local government entities (e.g., city, town, or county council). The parties may also desire to waive the right to a jury trial in any dispute. Finally, the parties may agree to venue in a certain jurisdiction.

119 ACRP Report 114: Guidebook for Through-The-Fence Operations ATTORNEYS FEES AND COURT COSTS The parties may agree that each party shall pay its own legal fees arising from any dispute. Alternatively, the parties may agree that the prevailing party shall be awarded attorney’s fees and court costs. OTHER COSTS AND EXPENSES The parties may agree that each party will pay its own costs or expenses incurred or that will be incurred to execute and carry out the TTF agreement. NOTICES, CONTACT INFORMATION, AND COMMUNICATION METHODS The representatives of both parties should be identified in this provision. It is advisable that the parties be the same parties who execute the agreement. The parties’ attorneys should be included as well. Contact information should include full name, title or position, company or organization, address, e-mail address, and phone number. ENTIRE AGREEMENT This provision should declare that the TTF agreement constitutes the entire agreement between the parties and that it supersedes any oral agreements made before executing the agreement. To ensure that it supersedes any oral representations, it should state that any modification to the agreement must be in writing. SEVERABILITY This provision stipulates that the remainder of the TTF agreement remains in force, even if certain provisions are found to be invalid. 6.7 WRAP-UP This chapter outlined a best practices approach for developing and implementing a sound structure for TTF operations which included discussion of each of the following areas: Policy – An airport sponsor’s policy on TTF operations identifies the permitted, restricted, and/or prohibited TTF activities for TTF operations. Additionally, the policy defines the key terms relevant to TTF operations, provides an overview of the application and approval process, outlines specific restrictions associated with TTF operations, and stipulates the possible grounds for denial of an application for TTF operations. Application – The application for TTF operations is utilized to obtain the information, data, and documentation necessary to conduct an assessment (discussed in Chapter 5: Assessing TTF Operations). Rents and Fees – Creating economic parity between TTF entities and on-airport operators, tenants, and users is one of the greatest issues associated with TTF operations. As such, it is imperative that airport sponsors develop and implement a TTF operations rents and fees policy that addresses the establishment and adjustment of rents and fees for the use of on-airport land, infrastructure, and/or improvements for TTF access; the use of TTF property land, infrastructure, and/or improvements; engaging in TTF activities; and TTF access. Agreement – The importance of having a TTF agreement cannot be understated. This legal written instrument stipulates the terms and conditions associated with TTF operations including engaging in TTF activities, using TTF access points, and using the airport. The most common forms of TTF agreements include deed restriction, easement, lease, license/permit, and contract. Consistent with best practices, the TTF agreement should be reviewed by the FAA before being executed by the airport sponsor and the TTF entity. By providing a sound structure for TTF operations, airport management and policymakers can help ensure that the federally obligated airport will be planned, developed, operated, and managed to ensure the safety, utility, and efficiency of the airport for the benefit of the public.